In these uncertain times, Bitcoin and crypto-currency emerge as welcome solutions for investors
South Africa is burning and confidence in South African banking is going up in smoke. On 13 July 2021, major banks’ shares – Nedbank, Absa, FirstRand, Standard Bank – all dropped an average of 5% as a result of the country’s current unrest.
The rand sank to a three-month low against the US dollar, hitting R14.67 and losing almost all the gains it made since the beginning of 2021.
This isn’t quite the catastrophic rate we saw in April 2020, at the height of the pandemic. But potential long-term threats to the food supply, particularly if the violence spreads to other parts of the country, means the currency could be in for a rocky road. Couple this with a record-high unemployment rate of 32.6% (and a stunning 43.2% of the entire labour force), and the forecast for SA markets looks dismal.
Citibank has pulled its exposure to FX and bonds, betting that the unrest will continue.
Expecting the rand to further plummet as COVID-19 cases grow and the vaccination programme is brought to a halt, some investors are even shorting the currency.
Since the move of decentralised finance (DeFi) from relative obscurity to the mainstream, as a result of the “DeFi Summer” of 2020, a plethora of financial solutions have sprung up that were previously only within the realm of traditional financial institutions.
A historically volatile asset, hardly anyone would’ve ever suggested that Bitcoin would someday be the knight to the rescue for investors looking desperately for somewhere to put their rands.
But Apple co-founder Steve Wozniak’s recent statement that Bitcoin is a “mathematical miracle” serves to illustrate why Bitcoin – and crypto-currency as a whole – are just the miracle that investors might need right now.
“In times of turmoil, reducing risk as Citibank did is key, but that doesn’t mean investors need to stop earning returns because of it,” says Jon Ovadia, CEO of OVEX, a South African crypto-currency exchange and prime brokerage specialising in over-the-counter (OTC) trading, arbitrage and high-interest-earning crypto-currency accounts. “DeFi opened the doors to previously unforeseen ways to earn returns with Bitcoin and crypto-currency. At OVEX, we built our tools with South Africans in mind so that people can invest in crypto-currency and still earn returns, regardless of whether the ZAR is crashing or not,” Ovadia says.
One of the ways the company uses to earn completely risk-free returns for its clients is by capitalising on the price differences in crypto-currency between foreign and South African exchanges, taking on all the risk for these trades themselves. Clients uniformly earn approximately 3% in returns for these arbitrage trades.
For institutions and high net-worth individuals, OVEX offers a personalised over-the-counter service, making use of its extremely deep liquidity to carry out large-value trades. This is an excellent solution for anyone looking to shed rands in a hurry and swap them for a more stable crypto-currency (such as the stablecoin TrueUSD).
Stablecoins are crypto assets that are completely backed 1:1 by FIAT currency, meaning the price is extremely stable and not volatile. A few great examples of these are TrueUSD (TUSD) and Tether (USDT). OVEX offers returns of up to 20% per annum on these stablecoins.
“Our high interest-earning accounts are another way for investors to earn with crypto-currency, without risk,” says Ovadia. “By swapping rands for a stablecoin like TrueUSD, then earning interest on that asset, South Africans can ride the current wave of instability while still earning returns.”
Prior to the current upheaval, the rand was number one in emerging market currencies. If the violence can be quelled quickly, hope remains that the currency can continue to recover after a difficult pandemic. Meanwhile, investors can hedge against losses by making use of the many risk-free services that DeFi exchanges like OVEX now make possible.
In the turmoil, Bitcoin and crypto-currency might be just the solution to rescue worried investors’ returns.
Or go to OVEX.