The reasons behind Bitcoin’s recent rally
07 Aug 2019
Bitcoin has enjoyed an impressive rally this week, jumping 10% as global stocks were rattled by China’s currency devaluation.
The Chinese yuan falling to under 7 to the U.S. dollar on Monday is one of several reasons for Bitcoin’s most recent surge.
As deVere CEO and founder, Nigel Green was quoted as saying in the media earlier this week: “With the Trump administration now officially labelling China a currency manipulator, escalating the tensions between the world’s two largest economies, investors are set to continue to pile in to decentralized, non-sovereign, secure currencies such as Bitcoin, to protect them from the turmoil taking place in traditional markets.
“It underscores that Bitcoin is now unquestionably regarded as a flight-to-safety asset during times of market uncertainty.”
This was a view echoed by the CEO of crypto payments firm Circle, Jeremy Allaire, as reported by Coin Telegraph: “Humanity has now created a non-sovereign, highly secure mechanism to store value that can exist anywhere the internet exists,” he told CNBC on Monday.
Another factor is the ongoing effect of the trade dispute between the U.S. and China is considered a bonus for Bitcoin, the world’s largest cryptocurrency by market capitalisation.
As global stocks were rocked this week, with the Dow Jones experiencing its worst trading day of the year so far, Bitcoin gained 3.2% in the most recent of a series of rallies to move up to more than $12k on Tuesday.
Tom Lee, head of Fundstrat told CNBC this week: “Weak dollar has been good for Bitcoins. ... And it’s been really correlated to risk markets. This year, it’s steered away from the dollar because dollar’s been strong, Bitcoin’s been up, which is a real breakage. It’s gone negative on correlation to the equity markets.”
Lee added that crypto is now “positively correlated to gold”.
This was reiterated by Nigel Green: “Bitcoin is living up to its justified reputation as a form of digital gold. Up to now, gold has been known as the ultimate safe haven asset but Bitcoin - which shares its key characteristics of being a store of value and scarcity – could dethrone gold in the future as the world becomes increasingly digitalised.”
Furthermore, with Bitcoin’s present price performance, it is driving sentiment that BTC is becoming more and more useful as a hedging instrument.
According to cryptocurrency and blockchain lawyer, Jake Chervinsky: “Bitcoin is doing exactly what it's designed for today.”
Tom Lee went on to say that crypto proved “itself this year to be a hedge against global risks.”
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