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Grayscale Investments, the cryptocurrency badet manager backed by Digital Currency Group, which acquired CoinDesk in 2016, released a report showing what it claims to be the potential of bitcoin as a protection against global liquidity crises .
Overall, the authors suggest that bitcoin should be considered a strategic position in long-term investment portfolios, given its transparent, immutable and comprehensive liquidity. Bitcoin has a distinct set of properties that can not be compared to any other badet, allowing it to perform well during normal business cycles and market disruption.
In addition, noting significant changes in monetary, fiscal and commercial policies around the world, Grayscale says that politicians and policymakers may find it increasingly difficult to manage their economies, implying the need for investors to control their economies. own finances.
The report examines five recent macroeconomic shocks in which digital badets outperformed other investments as a store of value. The authors extrapolated from these case studies – including Grexit, Brexit, China's structural devaluation of the renminbi and two Trump shocks – that bitcoin could be a useful tool to help investors protect their portfolio from any eventual market failure.
Below are three exegeses of Bitcoin's inherent ability to protect against liquidity crises.
Bitcoins gains as Grexit approaches
In the first case study titled "Grexit and the three-week closure of Greek banks", which lasted from April to July 2015, Greece experienced a physical liquidity crisis, with default on sovereign debt seeming inevitable.
IIn response to financial uncertainty, the Greek government closed state banks and imposed strict control of capital movements as of June 28, 2015.
These restrictions remained in force for three weeks, while bailouts were negotiated with international creditors, raising fears about the uncontrolled power of governments over centralized badet holders in times of crisis.
Yet, "during the liquidity freeze, bitcoin has become one of the only ways to transfer value to or from Greece, thereby enhancing the ability of this new badet to give control to the person who holds it, "write the badysts at Grayscale.
Before the resolution of the Grexit crisis of 13 July 2015, bitcoin returned 28%, compared with an average of -1.7% for 20 other markets and currencies.
State-led devaluation
Another case study examined the structural devaluation of the renminbi by the People's Bank of China and the change in China's monetary policy between August 2015 and December 2016.
In the face of stock market turbulence and worries about the health of the world's second-largest economy, the Chinese government lowered the RMB-USD benchmark rate by 1.9 percent, marking the shift to "market-driven" pricing. And an attempt to stimulate export-led growth.
According to the researchers, this policy change led to the largest single-day decline in RMB in twenty years, as well as the sale of five months of global risk badets to wealth preservation badets.
Again, Greycale notes that Bitcoin is much better off.
"Between the day of the announcement and the bottom of the draw, Bitcoin far outperformed major markets and currencies, generating a cumulative return of 53.6% versus an average return of -10.1%."
Bitcoin was used to hedge against the Chinese liquidity risk caused by local investors who sold their badets against a structural devaluation of the currency.
Brexit, Bitcoin and risk management
The shock of the British referendum vote on the separation of the European Union was followed by an impulsive sale and an immediate decline in the pound sterling (GBP) and the euro, as the market was trying to determine if Brexit would predict the disintegration of the market. European Union.
The researchers found during the first global sale of one day that "bitcoin was a very powerful badet, showing a return of 7.1% on a high volume, against an average of -2.1% for the rest of the group of currencies.
In addition, researchers have reason to recommend, as details of the transition plan are still being developed, global investors may consider spending some of their badets that can be invested in bitcoin to protect themselves from contagion. from the euro area, the second largest economy in the world.
More information in the full report.
Image Michael Sonnenshein via the CoinDesk Archive
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