While it's still early days, the crypto is emerging as a viable global hedge.
Travis Kling, CIO of crypto asset management firm Ikigai Asset Management, told TD Ameritrade the rally in crypto caught him by surprise considering "the increase in stress from what's going on with the trade war." He offered a possible catalyst for the gains, saying:
"This is a hedge against irresponsibility from governments and from central bankers…the world is waking up to the value of a hedge against...quantitative easing.”
“This is a hedge against irresponsibility from governments and central bankers…the world is waking up to the value of a hedge against quantitative easing.”@OJRenick and @Ikigai_fund's @Travis_Kling go down the checklist for why #bitcoin won’t stop rallying.
📊 $BTC $ETH $LTC
— TD Ameritrade Network (@TDANetwork) May 13, 2019
Kling noted the importance of global outflows to bitcoin, and he noted that "there could be onshore renminbi capital flight stuff that's going on...that could be driving the positive crypto price action right now."
In a note to clients cited by CNBC, Andy Brenner, head of International Fixed Income at National Alliance Securities, observed BTC's recent and sharp divergence from Chinese currency prices, writing:
"If you were in China and you wanted to diversify, it would seem logical that bitcoin would be a short term alternative. While we do not see the direct flows of who is buying bitcoin, we can see that the bid for bitcoin in this latest run has coincided with a big downtick in the value of the Chinese Yuan versus the dollar.”
Brenner's comments come as the Dow has tanked by more than a 1,000 points since last week. Over nearly the same time period, bitcoin has moved to its best level since last year. At the time of writing, its price was about $8,100, marking the first time it's pierced $8,000 since July 2018.
Bitcoin Sheds Stigma
Crypto enthusiasts know that a traditional finance player recognizing crypto as even an alternative is a huge development. Cryptocurrencies have come a long way in shedding a stigma and moving closer toward mass adoption.
The bitcoin price's volatility has been one of the main reasons interest has seemingly been tepid.
While bitcoin has been highly volatile, it seems it’s finally coming into its own.
Bitcoin as a Hedge
Today’s low interest-rate environment may also work to bitcoin’s advantage and contribute to its emergence as an alternative asset. This according to Michael Moro, CEO of Genesis Global Trading. Similar to the appeal of high-growth tech stocks, investors may look to BTC as a riskier but faster-growing bet as cash continues to earn next to nothing. Moro is quoted in CNBC as saying:
“If you look back at 2018 when the Fed was raising interest rates, bitcoin was not performing well. I think that’s what we’ve seen with bitcoin the last two months -- the Fed signaling we’re cutting rates.”
Other central banks have followed suit, including New Zealand, which just experienced its first rate cut in more than two years.