Revolut opens market access to gold and cryptocurrencies; genius or foolhardy?

Mainstream financial markets are facing Covid-19 induced downturn. The Bank of England, along with other financial institutes across the globe, has made it known that it is willing to purchase an unlimited amount of debt to finance the fight against Covid-19. This poses an inflation threat to the public, meaning their investments and savings are likely to be devalued.

Taking advantage

Revolut, the UK fintech business with a global online platform, is adapting to the current crisis to offer users opportunities to diversify their investment portfolio via that platform.

Revolut has brought forward their plans to allow users to purchase and trade both cryptocurrencies and gold. Users will there be able to diversify their portfolios to mitigate the downturn and invest in what are being referred to as ‘investment safe havens’ – cryptocurrencies and gold.

Gold has indeed proved to have held its own in previous financial crises when other investment options such as bonds and securities have declined. Cryptocurrencies such as bitcoin are entering their first proper financial market crisis, and moves such as this suggest a hope that investors will invest in them expecting that their decentralised nature will avoid the volatility of the traditional fiat currencies.

The notion of all cryptocurrencies being referred to as ‘investment safe havens’ is ludicrous because, unless they are tethered to underlying stable hedging assets such as commodities, there is no certainty or safety in investing in them as an asset class. Gold, or blockchain-enabled gold, (e.g. gold-backed stable coins) are a different matter altogether, being flexible ways to hold and transfer wealth in a safe haven manner.

Genius or foolhardy?

On the face of it, Revolut’s announcement is ingenious, but if its decision is based on the ‘safe haven notion’, it is flawed. Whilst gold has proved to be a reliable resource for investment during uncertain financial times, and gold-backed stable coins or fractionalised gold investments via blockchain would be a natural hedge, cryptocurrencies have not.

On balance, Revolut appears to have taken a positive step in opening doors for customers to diversify, but investing in cryptocurrencies does not bring with it any certainty of maintaining value. By their very nature they are volatile and subject to huge hikes and falls in value over time, sometimes unpredictably.