Categorized | Domaining Tips

Domains and… the Next Financial Crisis?

Posted on 15 October 2018 by Andrei

As I’ve mentioned on more than one occasion on DomainingTips, domains are “risk-on” assets and while that does mean that in the event of an exogenous shock which brings about a market crash (a deflationary event), they’re likely to become even less liquid than they are now and go down in value, it’s important to understand that a financial crisis can come in all shapes and sizes.

Frankly, I for one am not afraid of a “plain vanilla” crash.

That’s just the business cycle doing its thing.

As someone who even trades cryptocurrencies, I’ve become accustomed to extreme levels of volatility, no problem at all.

What I am however not just afraid but downright terrified of is the fact that in my opinion, we will eventually have to deal with a seemingly (at first) “plain vanilla” crash followed by governments and central banks trying to fix things with more of the same (stimulus, quantitative easing, the whole enchilada) BUT… the market will just say no.

In other words, what I’m afraid of is a crash followed by a rejection of “status quo” measures, which leads to a generalized loss of confidence.

In what, you might ask?

In the elephant in the room. Not stocks. Not real estate. But governments and central banks.

Should something of that nature occur, then needless to say, anything that doesn’t have to do with governments and central banks will represent a hedge. Stocks will be seen as imperfect but far better than let’s say sovereign debt. The same way, hey… central banks can’t print more land, right? Exotic assets like domain names and crypto would, in such a scenario, represent yet another hedge and as you can see, you wouldn’t be in such awful shape as someone who owns INVESTMENT GRADE (!) domains (the best of the best).

My only goal for today is making it clear that while domains would most likely suffer in the event of a “plain vanilla” financial crisis, things would stand quite a bit differently if the initial crash is followed by a loss of confidence in governments and central banks. Differently in that while there would be some initial pain involved for portfolio holders, that might change dramatically once it becomes clear that the financial crisis is not a “plain vanilla” one.

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