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Demand for savings products that yield far higher returns than what can be achieved in traditional markets is expected to surge, as more people realize that inflation is eating away at their savings, crypto derivatives exchange BitMEX has said in a new report.
After 14 years of loose monetary policy, “an entire generation” of people has never experienced the power of compounding on their savings accounts, BitMEX wrote in its report – in which the exchange looked into five ways the crypto world will change in 2022.
It went on to say that this generation, described as the oldest members of Gen Z, has never had the chance to generate returns without taking on risk by simply depositing their savings in bank accounts or government bonds. This explains why people from this generation seem more willing to take on risks with their investments.
Further, the exchange said that with the prospect of rising interest rates in 2022, putting money to work in the stock market now is “a tad optimistic.”
Instead, the smarter move would be to “wait until the dust settles” after a rate hike, the exchange suggested, noting that the initial hike “might even create sufficient fallout for the [Federal Reserve] to resume its easy money policy.”
Until that time, however, investors will be on the lookout for a low-risk place to put their money, the report predicted, adding that although decentralized finance (DeFi) platforms do offer decent yield, they are generally not considered low-risk by the average investor.
Similarly, it said bank deposits will not be an option for most investors seeking a return, given high inflation that will “keep real yields at historically low levels for the next several years at least.”
A better alternative for most investors, according to BitMEX, is more centralized crypto-based lending and borrowing services, which offer fixed interest rates on crypto and stablecoin deposits, with the exchange’s own BitMEX EARN offering being one such example.
“Given the current macroeconomic environment, demand for high-yield savings products from reputable crypto firms could surge this year,” the report said, before adding that it has the potential to “finally give younger investors a taste of low-risk returns.”