Bitcoin Strengthens Position as Global Hedge

Over the weekend, the price of bitcoin peaked at $11,774.50 marking an increase of 12%. In comparison, the Chinese yuan reached an 11-year low against the dollar and the S&P 500 fell 2.7%. Gold rose 1.5% finishing at $1,461.30 per ounce. 

A Growing Safehaven

Many experts have opined that this is more proof that bitcoin truly does act as a form of digital gold. 

In an email to Barrons, Tom Lee of Fundstrat noted that for the past year and a half, bitcoin’s surge “was highly correlated to [the U.S. dollar] and even the S&P 500. But recently, as macro risks have risen, [Bitcoin] has become positively correlated to gold and inverse to S&P 500.”

The NY Post notes that many Asian investors are beginning to view bitcoin as a “safe haven” comparable to gold. This is more evident as trade tensions increase between China and the United States.

CryptoCompare’s CEO Charles Hayter stated in an email to CNBC that “Bitcoin has many use cases and one of the most important is as a form of digital gold.” He adds, “We have seen bitcoin jump before on macro uncertainty as it becomes a conduit and flight-to-safety asset.”

In the same CNBC article, Simon Peters, an analyst at eToro, said in a note that “Given that Chinese investors make up a large proportion of crypto investors, there’s a strong possibility some are backing bitcoin’s chances against the yuan.”

Trade Wars

The increased tensions between the U.S. and China have led many to associate these increasing tensions with the rising value of bitcoin.

Just today, the Wall Street Journal reported that the U.S. Treasury Department designated China as a currency manipulator for allowing its currency to drop in value. China’s central bank said the depreciation was “due to the effects of unilateralist and trade-protectionist measures and the expectations for tariffs against China.”

The Journal notes the Trump administration’s position that the Chinese devalue their currency in order to artificially lower the price of its goods on global markets. This depreciation could push the Federal Reserve to cut interest rates. 

Freedom to Choose

Amid this trade war, we find that more investors are looking to hedge against an uncertain global market using bitcoin. In this case, we find that a depreciated yuan led many to diversify into bitcoin. 

As tensions continue to escalate, so does uncertainty. This is only one case of many where bitcoin has become an option against fiat currency manipulation and macroeconomic trends. 

Unlike generations before us, we now have a global decentralized store of value that is above centralization. It is the currency for the people, globally, that is beholden only to mathematics and code and not centralized manipulators. 

Bitcoin provides everyone the unprecedented ability to store or move value in the freest of all markets.