More than $17 trillion is currently stuck in global negative-yielding bonds, prompting many economists to speculate over the possibility of grave macroeconomic risks in the long run, and potentially moving their money to Bitcoin and other alternative assets.
Serial entrepreneur and co-founder of Gemini cryptocurrency exchange, Cameron Winklevoss, is among those who think the threat from negative-yielding bonds is indeed real. This, according to him, multiplies Bitcoin’s charm as an alternative investment vehicle.
17 Trillion More Reasons to Invest in Bitcoin
Winklevoss added that the $17 trillion in negative-yielding debt accounts for 17 trillion more reasons why people should invest in Bitcoin.
Negative interest bonds are basically assets that depreciate over time, leaving the investor with the task to find someone who would be willing to pay a higher price down the road.
Bloomberg reported earlier in August that nearly 30% of all invest-grade securities are currently returning negative investors. Despite that, many investors were willing to dive head-first into such assets in the hope of gaining from any future increase in price or benefitting from cross-currency hedging rates.
It is also not unusual for many investors to add these bonds to portfolio just to avoid greater losses elsewhere.
The Absurdity of Negative-Yielding Debts
Negative-interest bonds are basically akin to the kind of investment wherein you lend $10 to your friend after being promised a net return of, say, $9 three years down the line.
Despite this absurd premise, the asset class is consistently on the rise — more so now that increasing volatility resulting from a looming financial crisis and other geopolitical factors are adding more to the ongoing bond rally.
All things considered, it is tempting to argue that investing in bonds with negative yields and hoping to earn a profit only by selling it to someone willing to pay a premium rate on your loss smacks of a typical Ponzi scheme.
Commenting on the threat from negative-yielding debt, Twitter user @Rhythmtrader had pointed out earlier today that the net volume of these assets is “twice the value of all gold ever mined, and 115x the value of the entire bitcoin network.”
Compared to bonds, stocks, and most other conventional assets, Bitcoin has shown enough sign of being a healthier and more robust alternative despite many short-term setbacks. As BeInCrypto had reported earlier last month, Bitcoin’s true potential can be better gauged by its yearly-lows, instead of the all-time-highs.
Meanwhile, as BeInCrypto has previously reported, Bitcoin may have just embarked on a new uptrend after finding support above the 100-week MA.
Do you agree with the sentiment that negative-interest bonds are the real Ponzi schemes in the world of finance? Share your thoughts in the comments below.
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