Expert Insight

Art world turns to cryptocurrency as investors eye ‘safe havens’ in 2019

Next year's anticipated global economic downturn is driving more and more art lovers towards turning their savings into digital assets

Cryptocurrencies like Bitcoin and Ethereum will increasingly be treated as ‘safe havens’ for investors in 2019, according to an influential art and tech expert.

The comments from Ian McLeod of Thomas Crown Art – one of the world’s leading tech-art agencies – come amid growing concerns that the global economy is likely to experience a downturn by the end of 2019.

Leading economic indicators tracked by the Organisation for Economic Co-operation and Development (OECD) have weakened since the start of the year, and suggest slower expansion over the next six to nine months.

Similarly, the wider global expansion that began around two years ago has plateaued and become less balanced, according to the International Monetary Fund.

Trade tensions

“There’s a growing list of investment tailwinds to consider for 2019,” observes Mr McLeod.

“These include significant trade tensions, rising interest rates, political uncertainties – including Brexit – and complacent financial markets.

“The US – the world’s largest economy – has, of course, considerable influence on Asian and European economies. As such, should the US stock market plunge – as it did recently scrapping all of its 2018 gains during a major sell-off – global markets are vulnerable too.”

The expert also cites the limited supply of leading cryptocurrencies as a key tipping point for investors as they weigh up the prospect of mass adoption and regulation over the coming years.

“Against this backdrop, we can expect cryptocurrencies will increasingly be seen as investors’ ‘safe havens’ in 2019 and beyond,” he adds.

“When the downside of the economy hits, digital assets like Bitcoin and Ethereum are likely to be viewed by investors as a robust means of storing wealth, in the same way they do with gold.

Limited supply

“There are several keys reasons why the likes of Bitcoin and Ethereum will be safe havens. These include scarcity, because there’s a limited supply; permanence, they don’t face any decay or deterioration that erode their value; and future demand certainty as mass adoption of cryptocurrencies and blockchain, the technology that underpins them, takes hold globally.

“As mainstream adoption is going to dramatically gain momentum in 2019 as the world, especially business, realise ever-more uses for and value of crypto and blockchain.

“Ethereum’s blockchain, for instance, is used in our art business. It has allowed us to create a system to use artworks as a literal store of value – it becomes a cryptocurrency wallet.

“It also solves authenticity and provenance issues – essential in the world of art.

“We are some way off from cryptocurrencies replacing the Swiss Franc, the Japanese Yen or gold as the preferred safe haven assets.

“However, as the world moves from fiat money to digital, and as adoption of crypto picks up, there can be no doubt that cryptocurrencies will be firmly in the pantheon of safe haven assets within in the next decade.”

Learning from history

The concept of investing into art – and indeed using cryptocurrency to do so – isn’t an entirely new concept. For decades, when faced with a potential economic slowdown, many investors have historically parked their funds into artworks knowing they will hold value until a better financial climate transpires.

According to Edinburgh-based economist and historian Remy Wijnhard, the prospect of using cryptocurrency to then invest in art makes huge sense – particularly in terms of long-term investment.

“If you look through history you will see periods of time which are littered with people gathering up their spare funds and investing it all into an asset which will hold its value for a long period of time,” he explains.

“In the last hundred years or so it has been a particularly common practice when political uncertainty through events such as the prospect of warfare, for instance, has been looming.”

He gives the Second World War was a classic example when multiple countries suddenly had their national currency reduced massively in value and banks were unsafe, leaving people with few options for their money.

As people fled their native countries, many bought up artworks that were being shipped abroad. They would then sit out the conflict, returning with their investment when the economy had recovered.

“Although we are in a time of relative peace, in many ways we have very similar scenarios in terms of political turmoil,” adds Mr Wijnhard.

“Brexit, for instance, is causing great concern throughout the UK for many investors, and in other countries such as France, Italy and Spain the impression is that economic uncertainty is just around the corner.

Long-term investment

“So there are some obvious and simple solutions here for people to put their hard-earned savings away until the outlook is more settled.

Cryptocurrency, he claims, could be the answer in terms of moving fiat currency into a digital asset that should hold value as a long-term investment.

“Yes, of course, crypto markets have not been stable recently, but looking ahead we have a wider global acceptance, regulation, and even listings on Nasdaq in front of us now,” he adds.

“That makes the prospect of crypto as an investment much more appealing, and of course there is also the option of then using that crypto investment – which is transferable anywhere in the world – to invest in art.

“You now have the best of both worlds to choose from – a twist on an economic classic, if you will.”

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