Interesting article from Bloomberg showing that people/investors are willing to pay a premium when the geopolitical or monetary situation in their respective countries is worsening.
This is the ultimate sign that Bitcoin is a hedge against risks. Government & Currency Wise.
Here are some extracts of this article.
In Argentina, where the peso plunged on election uncertainty, Bitcoin was recently trading for as much as $12,000 on LocalBitcoins.com, a peer-to-peer platform, or 10% higher than on many international crypto exchanges. The token was trading at about a 4% premium in Hong Kong, where continued anti-government protests are raising fears of retaliation.
- “Bitcoin is becoming the asset of last resort in areas of extreme currency devaluation and political uncertainty,” said Rayne Steinberg, chief executive officer at Los Angeles-based crypto hedge fund Arca. *
- “In the last week alone, Bitcoin is up approximately 50% against the Argentine peso and trading at a significant premium on local exchanges. And they are not alone, joining the ranks of Venezuela, Hong Kong and Turkey who have also experienced similar shocks.”
The premiums would seem to support the argument that Bitcoin is a means of protecting assets from plunges in local currencies and authoritarianism. Even so, the cryptocurrency has tumbled about 8% to around $10,890 this week, increasing the risk for investors in troubled nations of moving from one volatile asset to another.
In the past month many advocates have been pointing to the increased negative correlation with U.S. equities as proof that investors were turning to Bitcoin as a haven. That narrative proved to unravel this week as the inverse relationship broke down.