Hedge assets scarcity is bitcoin the gospel? The rate of return is bitcoin attraction
Although the 2007 – after the introduction of the 2008 financial crisis severely regulation suffered a lot of criticism by industry participants. However, they also received an unexpected result: increase bitcoin attractiveness to investors.
Since the economic crisis, regulators will create a complex rules and regulatory measures to ensure sustainable framework, the stability of the global financial system. This new framework affects many different aspects of the financial services industry, including financial institutions involved in the transaction.
According to the new rules, investors often need to deposit cash in the transaction (called “deposit”). This margin is usually stored in the clearing center. The liquidation center belongs to intermediaries, can help to ensure that even if there is a side exit transaction can still happen.
The clearing center will then take these deposits, and its lending in return for security assets through repurchase agreements or the repo market, such as German bonds or treasury bonds, which will enable them to make short-term loans.
This whole process will produce a government bond safe assets — especially of high quality, more and more scarce effect.
The European central bank executive board member Mel Yves. (Yves Mersch) was recently warned that the situation may be more and more serious.
He said in a speech on January:
“Many institutions still centralized clearing transactions in the market, so the demand for infrastructure in exchange for cash collateral will rise.”
Although the clearing center has been panic buying safe assets, but it is not unique in this respect. Global central banks also in panic buying, 08 years after the economic crisis they bought trillions of dollars in bonds. The quantitative easing (QE) is one of the main purpose is to put downward pressure on interest rates, thereby boosting lending and stimulate economic growth.
These efforts were largely successful, because interest rates have been maintained for several years at a very low level.
Although QE helps to create a low interest rate environment (so as to obtain appropriate borrowing costs), but it is on the income produced an unexpected downward pressure.
According to many analysts surveyed by Coindesk said, the current market environment has led many investors to seek yield, which in turn makes investors eyeing a bitcoin.
Crypto Asset Management chairman Tim Enneking said the bitcoin digital currency, he said:
“Safe haven assets is not so short, all asset classes low yields is the key to make bitcoin attractive to investors.”
He added that this low yield environment is “to promote all of the assets of the appetite for encryption”.
Encryption assets fund manager Jacob Eliosoff also talked about the lack of high yield investment opportunities created by key needs, and how he thinks this is promoting bitcoin demand:
“The search for yield driven by investor demand for bitcoin, I expect this is promoting bitcoin more attractive.”
ARK Invest analyst Chris Burniske told the Coindesk that the geopolitical and macroeconomic instability, bitcoin prices generally rose homeopathy. Therefore, the capital market will begin to understand the value of bitcoin as a “disaster prevention”.
The investment management company Binary Financial executive director Harry Yeh has been preparing for this, he said recently:
“Our new fund specifically for high net worth clients and institutions, so they can put money into alternative assets.”
He also said:
“Encryption currency is now considered to be global macroeconomic events (such as devaluation, even” British exit “) a safe haven assets.
Other analysts are given a more complex evaluation. Eliosoff stressed that, despite the economic recession might bring a Dongfeng bitcoin, but it depends on what factors lead to this recession first.
Genesis Global Trading CEO Michael Moro further stressed that “safety” is a relative term. He also pointed out that geography may play a key role in the decision-making of investors.
“If I were an American investor, I believe that in addition to bitcoin, there are many other security assets. But if I come from other economy more unstable region, so bitcoin may become the preferred.”
Moro said that from the historical point of view, the price of bitcoin and other assets are not related.
If a recession or financial crisis, then the digital currency will show a very attractive. In times of crisis, investors often feel panic, to sell a lot of different assets, resulting in a variety of different securities and depreciation.
If the selling happens, investors may find bitcoin more attractive, because bitcoin is a unique and not related to the asset class.