In a new report published by Grayscale entitled “Quantitative Tightening of Bitcoin against Quantitative easing of central banks, the digital currency management firm suggests that the current macroeconomic environment may trigger a deflationary spiral.
As global debt reaches $ 255 trillion, led by the US and China, systemic cracks remain a major concern, especially after the colossal figure was accumulated by the end of last year. That’s long before COVID-19 took nearly a quarter of a million lives, shook markets, shuttered entire industries, and millions of employees lost their jobs.
Against the backdrop of money printing, stimulus packages and the Federal Reserve’s determination to continue to use its powers, while the coronavirus pandemic is no longer a threat, investors must weigh the sustainability of traditional assets.
Grayscale analysts highlight four key tools investors can use to stabilize their portfolios, citing problems with three of them because of their links to an overly stressed global financial system.
Four key tools
Fiat currencies – compromised by quantitative easing. Investors may continue to strive for a strong US dollar, a global reserve currency that carries the risk of destabilizing global assets.
-State bonds – compromised by quantitative easing, high interest rates, negative returns and declining purchasing power
-Zlato – move against the trend of digitization and thwart technological progress that supports portability and accessibility on request
– Bitcoin– denominated search for difference from debt, and remains outside the reach and influence of central banks
Analysts note that Bitcoin’s shortage makes it an attractive investment diversification tool with reduced correlation with other assets.
“However, in 2019 and during the first quarter of 2020, the relationship between Bitcoin and gold became closer as the correlation appears to be increasing as a result of trade tensions between the US and China, the escalation of Iran. and market fears about COVID-19. The correlation between Bitcoin and gold is on a historical scale, indicating that Bitcoin can act more as a safe haven. “
The report concludes that BTC can perform the same way gold did after the 2008 financial crisis, due to solid fundamentals such as Bitcoin’s high hash rating, high network activity and evidence of long-term accumulation of leading cryptocurrency.
“While gold prices initially fell in response to falling asset prices and widespread bankruptcies, precious metal rose more than 180% from $ 682 in October 2008 to $ 1,912 in September 2011. Likewise, after initially reporting a severe decline , Bitcoin is up 96% from the bottom as of March 12th. “