According to the Grayscale, Bitcoin has features that allow it to work even in crisis scenarios. The firm evaluated possible scenarios following the commercial dispute between the US and China.
The Bitcoin investment firm Grayscale considers that Bitcoin is also among the coverage options for investors regarding liquidity risk, which could happen in scenarios such as the commercial war that is currently held by the United States and China.
In a report presented by Grayscale on Thursday, August 8th, the firm notes that the dispute between two economies on the scale of the two countries could seriously hinder global growth, thus potentially producing a domino effect of negative consequences that lead to a liquidity constraint.
In the document Grayscale defines the term “liquidity risk” as the possibility of a “real decline in wealth.” It is said that these financial losses may occur due to imbalances existing in an economy, especially with regard to credit and circulating money, in relation to the debt of the economy in question. The report explains that these scenarios can eventually harm investors, depending on how exposed their investment portfolio is to these imbalances.
The firm considers that Bitcoin could represent a great advantage. According to the analysis conducted by Grayscale, the cryptocurrency has some features as an asset that allow it to adapt to different economic scenarios.
It has been proven that Bitcoin has the potential to function well in the course of normal economic cycles, as well as during liquidity crises, especially those that involve currency devaluations like in the case of Venezuela.
Advantages of Bitcoin as an Asset
In its research Grayscale highlights the growth of the cryptocurrency as a means of payment among hundreds of thousands of traders all over the world. The text also mentions that Bitcoin has parity with the main fiat currencies of the world, an increasingly growing adoption and a technology in full swing.
After listing the attractions of Bitcoin as a way of protecting investors’ portfolios in risk scenarios, Grayscale says that they believe that the cryptocurrency deserves a stable strategic position within many long-term investment portfolios.
Grayscale compares the cryptocurrency par excellence with gold, since its value reserve is also based on scarcity. It should be recalled that Bitcoin not only has an issuance limit set in its code of 21,000,000 BTC. Besides, its issuance is reduced periodically through the process called halving, which occurs approximately every four years.
Regarding processes such as the current commercial dispute between the United States and China, the firm claims that it is not yet known to what extent the changes in monetary, fiscal and commercial policies of such world powers will impact global markets. On the other hand, they consider that the increase in tensions and the length of the dispute are risky. This sad reality increases the potential risk of significant contagion for the global economy and financial markets.
In the study conducted by Grayscale it is concluded that Bitcoin could be a useful tool to help investors isolate their investment portfolios from any possible failures and handle these emerging problems effectively.
By Willmen Blanco