Ever since its inception, Bitcoin has created a buzz across the world. While there are people who invest in Bitcoin as well as other crypto assets thanks to their decentralized nature, there are also many who think such investments do not hold the actual value. The debate is almost always ongoing. However, recently one of the world’s most prominent digital currency firms Grayscale stated that Bitcoin is finding its utility as a shield to rely on during the global financial crisis.
The multi-billion dollar firm recently issued a report called “Hedging Global Liquidity Risk with Bitcoin” wherein they have explained in detail how the paramount crypto is being utilized as a cover in the times of financial crisis and geopolitical turmoil.
Particularly, the company analyzed how the crypto asset could be utilized when the liquidity risks are considerably high. For that, the company has considered 3 primary aspects on which Bitcoin finds its existence:
Store of Value:
As noted by Grayscale, Bitcoin can and already has acted much better when it comes to value storage than metal gold. That’s primarily because the digital currency is not only decentralized and portable but can also be verified digitally. Moreover, Bitcoin is scarce with a maximum unit supply of 21 million. In fact, it can even be divisible with the help of digital technologies.
Contrarily, Gold is centralized in nature with an unlimited supply. In addition, it can not be moved freely and can’t be divided in a hassle-free way. It also becomes difficult at a point to authenticate the metal’s purity due to counterfeiting risks. Gold also doesn’t provide a fast value transfer like BTC.
The leading crypto firm also stated that Bitcoin has characteristics that are similar to conventional physical cash. That, as a result, helps the digital asset to hold on to a solid value even amidst liquidity crisis. The firm also brought to notice the recent crypto adoption embraced by corporate giants such as Microsoft, PayPal, and AT&T.
The firm stated that the technologies of blockchain have the potential to accelerate and build value for such digital assets which eventually would end up stimulating their demand further. It would help mitigate the majority of the negative impacts of any possible downtrend in the global market.
Grayscale has indicated that Bitcoin has fared well even during the geopolitical crisis – whether it was during Grexit, market collapse in China in 2015 as well as 2016, Brexit, or the latest trade war fiasco.
Interestingly, a section of people believes that the ongoing political tension between the US and China has also contributed to Bitcoin price increase considerably. In fact, a few also argue that the Chinese traders, as well as others in the region of Asia, have switched to BTC from the conventional stocks in order to avert the downside risks.
During the period of the company’s analysis (May end), BTC was up more than 120 percent a year till date, whereas Nasdaq 100 or crude oil index recorded a high of merely 13% and 18% respectively. As far as traditional assets are concerned, such as government bonds, gold, and foreign currencies, the numbers were quite bad as they noted an increase of lower than 5%. All these factors helped the firm conclude that Bitcoin can become the “King of the Asset Class Hill.”