By John Yearwood
The recent stock market plunge, U.S.-China trade tensions, instability in Hong Kong and recession fears have created the perfect storm that could fuel a continued rise in the value of cryptocurrencies, especially Bitcoin, according to financial analysts.
A number of reports and analysts have indicated in recent weeks that cryptocurrencies, long known for their volatility, are now attracting investors seeking to hedge against global financial uncertainty.
After bouncing around last week, at one point trading below $9,500, Bitcoin regained its footing and ended the week above $10,400 per token. That’s also significantly above where it began 2019 at $3,900.
“Get out of stocks NOW. Buy bitcoin and gold. Trust me,” tweeted Kim Dotcom, the German-Finnish internet entrepreneur.
“$BTC rally could have real legs,” the former Fortress Investment Group principal tweeted early last week.
But not everyone was pointing to crypto as a benefactor of the global unease. Billy Bambrough, a crypto and blockchain contributor to Forbes, wrote that Bitcoin has not yet proven that it is the best alternative to gold and other secure assets.
“Bitcoin is yet to establish itself as the safe-haven asset many see it as eventually becoming, falling sharply this week even as global stocks continue to slide — but in some places, people seem to be turning to [B]itcoin in times of crisis,” Bambrough wrote.
Travis King, head of cryptocurrency asset management firm Ikigai, added on Twitter:
“Lots of talk about BTC as a safe haven lately. Hasn’t (sic) acted like that last few days. Why? Could be crypto-specific mkt structure issues. We see those right now. Could also be BTC is strong enough to act as a safe haven to an extent and for certain types of stress, but not all. It’s like maybe BTC is strong enough to swim in the pool right now but not in the ocean.”
Still, there’s a renewed confidence being felt in crypto and a number of partnerships have been created to benefit from the rally.
Cred, one of the most influential names in blockchain finance, announced it was partnering with Bitcoin.com, the leading source of Bitcoin information with over 4 million Bitcoin wallets. The relationship allows Bitcoin.com customers to earn up to 10 percent interest on their Bitcoin and Bitcoin Cash.
“We’re thrilled to offer Bitcoin.com customers the opportunity to earn interest on their digital assets posted as collateral for a Cred line of credit, Dan Schatt, co-founder and president of Cred, said,” Dan Schatt, co-founder and president of Cred, said when the deal was announced. “Whether the market is up or down, customers can benefit from the liquidity they receive when obtaining a fixed amount of interest in Stablecoin. Customers also benefit by receiving the full upside on the amount of crypto they originally committed.”
President Trump delays China tariffs
Many analysts pointed to global instability for the boost in Bitcoin prices. The long-running trade dispute between the U.S. and China has unsettled business leaders in both countries.
President Donald Trump said last week that he planned to delay until Dec. 15 tariffs that were to take effect Sept. 1. Trump said the delay was due to concerns over potential Christmas shortages.
“We’re doing this for the Christmas season,” Trump told reporters. “Just in case some of the tariffs would have an impact on U.S. customers.”
During the week, images of protest in Hong Kong were widespread. Protesters even breached the territory’s main airport, forcing a two-day shutdown. Beijing responded by broadcasting a massive military presence 20 miles away.
By mid-week, investors were rattled when the U.S. stock market plunged by more than 800 points, its largest one-day point drop this year and one of the biggest in history. The market made up some ground by the end of the week but investors remained concerned about the future.
Added to that were fears that a recession may not be all that far off. On Wednesday, the yield for two-year bonds briefly outpaced that of 10-year bonds, which is not normal. If that happens for a sustained period, economists warn, a recession may not be far behind. Said Bloomberg: “Alarm bells are ringing louder in bond markets.”
“The curve inversion to this point is flagging a 55-to-60 percent chance of a U.S. recession over the next 12 months,” Richard Kelly, head of global strategy at Toronto-Dominion Bank, told Bloomberg.
Impact on crypto of a no-deal Brexit
And on the horizon, a likely no-deal Brexit. Britain is scheduled to leave the European Union by the end of October — with or without a deal. Reports out of London indicate that a no-deal Brexit is very possible. More information on Prime Minister Boris Johnson’s plans is expected this week after his meetings in Berlin and Paris but analysts say that cryptocurrencies are expected to benefit from a so-called hard Brexit.
“Bitcoin has rediscovered its mojo this year with multiple mini surges but a no-deal Brexit could see a massive and unprecedented breakout,” Nicholas Gregory, CEO of blockchain firm CommerceBlock, told The Independent.