Why every adult should have one month's worth of salary in crypto

For 70-odd years the West has lived in relatively calm times – no major cases of hyperinflation, war, etc. But recent events have highlighted that this generation, too, is unlikely to escape unscathed.

The current geopolitical situation in Europe, the global pandemic, and overall inflation has shown us how important it is to have a diverse range of financial reserves. To have multiple baskets for your eggs, so to say. 

Some advise gold. Some advise cash. I, personally, believe that every adult should have at least one month's worth of salary in crypto. 

History has shown us that in times of trouble, finances become problematic. While *knock on wood* that you won't ever have to experience it, we've heard the stories and seen the photos from history of hyperinflation, people using suitcases of money to pay for basic commodities. 

While rare, the financial system becomes incredibly volatile in times of crisis. On the other hand, cryptocurrency in its natural state is relatively volatile, but times of crisis do not affect it. As a result, having a combination of fiat for everyday needs, and a store of crypto needs for times of crisis may be the modern-day safety net for risk-averse, judicious individuals.

Here are just a few reasons why every adult should have one month's worth of crypto in savings.

1) Cryptocurrencies are independent of banking systems

Diversifying your savings minimizes risk. While this is true for investors, it's equally true for the average joe. Sure, you might have a great, stable bank. But if all of your savings are in a bank, then you're 100% dependent on that bank's success. 

But banks are fallible, as their continued success is based on the collective trust that they'll continue to do well. In a crisis situation, we can see people in a cash rush, which banks can't always sustain. In some cases, they go under, along with your savings. 

Living in the Baltics, we've seen this first-hand, and relatively recently. Like in 2008, when Parex bank collapsed after a run on cash that exposed the bank's solvency issues, and still has left 600 million EUR in people's savings uncovered.

2) No one can take crypto away from you

Cryptocurrencies are censorship-resistant – there's no political or organizational body that can decline or reverse a transaction in crypto. It can't be confiscated without your cooperation and simply holding it can't be taxed. 

In other words – it's safe from prying hands. 

While in times of peace and stability this typically isn't an issue, it's important to note that transactions in fiat currencies are inherently vulnerable to political and geopolitical interference. This can come in various forms, such as imposed sanctions, asset freezes, or limitations in cross-border transactions.

Therefore, if you find yourself under an unfavourable regime, you can feel confident that at least your crypto savings remain untouchable. Having at least one month's worth of savings will give you the lead time to make arrangements to extract yourself from these limiting conditions.

3) Crypto isn't subject to inflation – its value can't be drained

Ok, ok, that is, if you don't count volatility. But when it comes down to it, cryptocurrencies are not subject to inflation the same way fiat currencies are. Crypto is fundamentally different from a bank in that it can't just artificially print more money, and thus drive inflation. For example, there's a fixed amount of Bitcoin – 21 million – and there will be no more. 

At a time when even gold is entering the 2022 market at a -5% loss, it's worth considering how you can hold on to your savings without having their value drained through inflation. The answer could very well be in crypto.

Financial writer and analyst Mark Cussen reasons that in theory, Bitcoin could be a strong inflation hedge. The reasons – that it is a scarce, deflationary, censorship-resistant reliable long-term store of value – has caused people to liken crypto to “digital gold”.

So, having some of your savings put aside in a place where inflation can't get to it could be a very smart move in a time when we're soaring inflation rates. The US has reported a 40-year high inflation rate of 7.5%, with similar records worldwide.

Crypto – the modern way to be “better safe than sorry”

Some may say this is a bit over the top. These are the musings coming from people who, as Nathan Reiff so succinctly wrote, “are worried about hyperinflationary events, bank failures, or other disaster scenarios.” 

And honestly, two years ago I may have agreed with you. But now? I see the value in taking reasonable precautions. Sensible financial advice is to have 3 month's worth of salary in savings – because you never know. I believe that we should add 1 month's worth of crypto savings for this reasonable advice to meet modern-day threats.