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As Q3 2019 nears its end, an economic slowdown is being felt across all the world’s leading economies. It is noticeable in developed countries, such as the US and UK but is particularly evident in emerging nations, including China, India, and Brazil.
However, while the traditional economy in these countries has slowed significantly in the past year,and many other cryptocurrencies have experienced the opposite. The cryptocurrency market has sprung back to life after a dry spell lasting just over a year.
In 2019 alone, Bitcoin has moved to a maximum of 262 percent growth from its lowest price point early this year. On the other hand, stock markets in the US fell to record low numbers for the first time in a decade. Economists fear a looming economic crisis for the UK, while countries like China and India grapple with their own economic challenges.
Bitcoin has acted as an excellent escape hatch for investors to park their investments, using it almost like a hedge asset. Economists think that this is primarily why BTC has seen its value appreciate despite the prevailing global economic slowdown. Furthermore, some analysts predict the continual growth of the crypto markets, which could push Bitcoin prices upwards of $14,000.
For this to happen, central banks across the globe would likely need to implement interest rate cuts, stimulus packages and reduce the overall effects of the global slowdown. This could entice investors to increase their hard asset holdings, including gold and other precious metals, along with more speculative assets such as cryptocurrencies like Bitcoin.
The correlation between rate cuts in the US to Bitcoin price appreciation is primarily based on observations of similar market reactions in the past. Most recently, back in July this year, the federal reserve cut interest rates for the first time in 11 years. The rates were dropped by 25 base points (bps) following Federal Open Market Committees (FOMC) meetings that lasted between June and July.
During this same period, Bitcoin prices rose by 12 percent against the US dollar. Based on this, three further tax rate cuts of 12 percent each could see Bitcoin reach $14,000 before the year is out.
Although the market reaction in July cannot be considered the absolute benchmark when it comes to predicting the future, it can still serve as a rough guideline of things to come. The ongoing US-China trade war could act to stimulate the crypto economy further, potentially pushing Bitcoin prices over the short-to-medium term.
However, whether the cryptocurrency markets can sustain such increased value remains to be seen—given their inherent We can describe volatility as how much the value of an asset changes over a given time. A volatility index... More.
Do you think Bitcoin is an ideal hedge against government currencies, or will it too begin to slow down? Let us know your thoughts in the comments below!
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