2018 was rough for crypto investors, but the wider markets also collapse over the last few months. The latter months of 2018 saw trillions of dollars wiped from global equities’ value. High-yield credit offerings are also basically frozen, which may explain why gold, Bitcoin and volatility are found from binding to trading together.
Talking about financial market, people tend to keep their eyes closely to stock market but not debt market, where the last crisis unfolded.
After a decade since the sub-prime collapse, the global economy came to the edge of the abyss. We are once again facing odd conditions in the credit market that could lead cryptos into a deeper bear market, or establish them as the digital equivalent of gold.
Bitcoin – the new Digital Gold?
An article recently published by The Wall Street Journal (WSJ) that stated Bitcoin and gold have a 0.84 correlation over the past five trading days (as of December 28). A -1 indicates complete inversion and +1 perfect correlation. Bitcoin had a 0.77 correlation to the Chicago Board of Options Exchange’s Volatility Index (VIX) over the same time frame.
There is no way to know if a new trend is in place, but temporarily, it looks like BTC is becoming a digital safe haven since gold tends to rise when there is trouble in the financial markets.
In a nutshell, these alternations suggest that when times get rough, BTC may be the safe heaven to rely on. Normally government bonds would also be on the list of assets that offer safety in troubled times, but this time around, that may not be the case.
Easy Access for Big Money
If major investors are on the edge of accepting cryptos as a new way to buy safety from the full-of-risk financial markets, there are numerous new ways for them to do it. Grayscale Investments’ over-the-counter exchange-traded fund (ETF) is a good example of a new asset class that simply didn’t exist a decade ago.
Some commentators remarked on the ETF’s failure to hold the $1 billion USD assets under management (AUM) mark. The fund grew from around $50 million USD AUM in 2013 to around $900 million USD recently. This is pretty impressive given that cryptos didn’t have a legal status in most nations until 2017.
Now Bitcoin is available via numerous channels and could shoot up in price as the global financial system (continues) to melt down. There is no way to know how cryptos will behave in the long-run. However, if their popularity in places like Venezuela is any guide, they could become extremely popular if times get rough.
Here’s hoping that cryptos rise from the ashes of 2018 on their merits, not because the Western financial system has finally hit the wall, and central banks have run out of credibility.
Source: blockonomi.com
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