The economic turmoil, hedging product scarcity can promote bitcoin prices?
2007-2008 years after the financial crisis, the government regulation of the market has attracted a lot of staff complaints, but this is beyond all expectations, but the regulatory bitcoin more attractive.
After the outbreak of the financial crisis, regulators formulated a complex set of restrictions and fetters is designed to ensure sustainable and stable operation, the global financial system. The new framework is applicable to many different aspects of the financial services industry, including financial institutions involved in the transaction.
According to the new regulations, investors need to deposit cash in the transaction, namely “margin”. General trading middleman: margin by the clearinghouse for safekeeping, through this form, even if one party quit, also can ensure the smooth progress of the transaction.
Subsequently, the clearinghouse can through repurchase agreements or “repo” market, the cash in the safe assets (such as German bonds or treasury bonds), short-term loans.
So, safe assets (especially high quality government bonds) has become increasingly scarce.
The European central bank executive Mo Shi (YvesMersch) recently warned that the situation may be more severe.
He January said in a speech: “the market for the concentration of bills of exchange demand is still rising, so the financial market infrastructure in collateral cash exchange demand will rise.”
In panic buying of safe assets, the clearing house and not fight a lone battle. The world’s central banks have taken similar actions, they bought trillions of dollars of debt in the wake of the financial crisis.
Quantitative easing (QE) is one of the main target is to cut interest rates to stimulate lending, promote economic growth.
This policy is largely successful, for many years, the interest rate has remained at a very low level.
The pursuit of profit rate
Although the quantitative easing policy has created a low interest rate environment, but also produce beyond all expectations downward pressure on the rate of return.
Crypto currency hedge fund EAM chairman TimEnneking said: “it is a safe haven asset shortage, rather than all asset yields are low.” It also makes bitcoin more attractive.
He added: “low yield environment is to stimulate investors to encrypt currency interest.”
Encryption currency fund manager JacobEliosoff said: at present, the key demand by high yield investment opportunities arising from the scarcity of bitcoin is raised.
The ARK block chain investment analyst, product manager ChrisBurniske bitcoin news network CoinDesk said: “the local geopolitical and macroeconomic uncertainty during the surge, bitcoin prices tend to be boosted. Therefore, the capital market has bitcoin as a disaster hedge.”
Although investors in turbulent economic times tend to seek more safe assets, but the safety of scarce assets may make money into bitcoin. So if the economic recession, the stock market fell, the price of bitcoin may therefore rise.
Investment management company, managing partner of BinaryFinancial HarryYeh CoinDesk said: “the company launched a new fund specifically for high net worth clients and institutions, so that they invest in high return assets offbeat.”
He added: “when devaluation or a British exit such global macroeconomic events, encryption currency by investors as a safe haven asset.”
In addition, some analysts (such as Eliosoff) presents a more complex hypothesis, he stressed: Although the recession may boost the bitcoin, but the specific situation depends on factors and lead to recession.
MichaelMoro, President of financial institutions GenesisGlobalTrading pointed out that the “security” is a relative term, financial resources and geographical conditions play a key role in the decision-making of investors.
He added: “if I am an American investor, there are a lot of security assets available I chose, but when the crisis comes, bitcoin may be my first choice.”
Moro believes that the historical data show that not related to bitcoin prices and other asset prices.
If there is a recession or financial crisis, due to panic, investors will sell all kinds of assets, resulting in various types of securities devaluation. Cryptocurrencies will become more attractive.