Hedge fund manager Roy Niederhoffer, chairman of RG Niederhoffer Capital Management, says stock market corrections aren’t the only thing investors need to worry about. Expert’s comments and advice on gold, Bitcoin, Ethereum and the cryptocurrency market cryptocoin.com We have prepared for our readers.
“Zero-yield gold is quite an interesting asset”
Another situation would be far more catastrophic, if not more likely, Roy Niederhoffer said in a statement:
I believe the downside to the extreme is that inflation is too strong and the Fed can’t do anything about it. Because the government cannot raise interest rates above 3%, 4% because it cannot provide funds on its own, and it keeps it at these levels. The stock market crashes, whatever it is, something happens and causes printing money to be the only solution. Inflation is the only thing that can solve the government’s financing problem, and in that case, if you have any cash holdings, it will depreciate by 90% or more, not 30% or 50% like the stock market crash.
Roy Niederhoffer’s fund has beaten both of the last two stock market crashes. In 2001’s Dot Com debacle and 2008’s Great Financial Crisis, funding hit double digits as markets collapsed in both scenarios. The expert says that although it is unlikely to happen, investors still need to be prepared for this extreme situation, and he points out a few assets that can protect against this worst-case scenario:
It is very easy to prepare for this. Fixed supply assets, inflation hedges like real estate. I think gold is pretty interesting, because in a negative real-rate world, 0% return gold is a pretty interesting asset. And of course, as we mentioned, cryptocurrencies have a strong positive return and can represent subordinated investments. Because the value created by the network effect of the billions of people who use them can increase the value by 10, 100 or even 1,000 times.
Leading altcoin Ethereum could topple Bitcoin, according to expert
Roy Niederhoffer notes that when it comes to cryptocurrencies, Layer-2 protocols like the Lightning Network make Bitcoin more usable as a form of payment:
The Lightning Network represents a solution that you can literally do in millionths of a second (to slow down transaction times), and it’s transformative. And as it is now, instead of costing a Bitcoin transaction a few dollars, you’re talking about a few percent a cent.
According to the expert, innovations in Blockchain such as the Lightning Network not only make it easier and cheaper to transact with Bitcoin, but also open Bitcoin’s global reach and maximize its potential as a currency. Roy Niederhoffer explains:
Now you are opening up micropayments to people in countries with no access to banking, no access to country-to-country transfers, no access to investment. All of a sudden, you can use various small amounts to trade and invest, and this opens up banking to literally billions of people. It creates a relatively stable investment environment for people everywhere and also with highly regulated currencies.
Roy Niederhoffer adds that for the billions of people who have access to banking via Bitcoin, the public interest far outweighs the costs from energy consumption. According to the expert, if Bitcoin climbs to $100,000, Ethereum could reach $10,000 and “overturn”, the scenario where Ethereum’s market cap exceeds that of Bitcoin.
The expert’s comments are based on Ethereum preparing to enter one of the most significant upgrades in its history this year. In the transition called “The Merge”, Ethereum will switch from the Proof of Work (PoW) model to the Proof of Stake (PoS) model, thus reducing its energy use by 99.5%. Roy Niederhoffer says that aside from the two biggest cryptocurrencies, Bitcoin and Ethereum, it would be good for investors to buy an index of the next ten biggest cryptocurrencies instead of choosing individual coins.
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