Meltem Demirors – How Can Bitcoin Be a Risk-off Asset?
In the past few weeks, the geopolitical tension among Europe has increased significantly because of special military operation which takes place between Ukraine and Russia. These two countries have a vast difference in terms of geopolitical region, and still, Russia began its special operation in Ukraine. However, many western countries have started to oppose the actions of Russia because they do not like its action towards Ukraine. Therefore, they want to hit the Russian country by any means possible, and for that, they have also exempted Russia from SWIFT. Also, Western countries take some other actions, like removing Russia from its business transactions and cutting down any economic ties. Apart from this, Western countries take many other actions, like making their cryptocurrency exchange, to ban any services to the Russian citizens. You can get more information from https://bitiq.org/.
In this climate of special military operation in the geopolitical region of both these countries, bitcoins and cryptocurrency have played an enormous role. In general, we can say that in times of such a condition, a lot of devaluation is going on in the global market. Because of this, many investors are facing huge losses, but the bitcoin and crypto coins can be considered a hedge against this downfall in the market. Yes, as it is entirely different from traditional Finance, the devaluation of traditional Finance leads to increased prices of bitcoin and other crypto coins. Therefore, even though the crypto coins are not increasing their prices, they are getting a lot of investment in the past few weeks.
Current situations
Before we dig deep into the statements of the chief secretary of coin share, we must clearly understand both perspectives of risk-on and a risk-off asset. The current situation is confusing for the investors as they do not know where to trust. This economic paradigm situation going on will have different risk sentiments for different people. Investors are always ready to take huge risks in the risk-on situation. Their appetite for high-risk is on the top, and therefore, they invest more into the assets that they can purchase at a certain point in time.
On the other hand, when the market is in a risk-off situation, the situation of the investors is also converted into the other side. They start to sell their investments very fast as they do not believe that the future will be suitable for their investment. Therefore, the same is happening with the cryptocurrency space. More and more people are selling their investment, majorly, bitcoin. Therefore, bitcoin has chances of becoming a risk-off asset. In the current situation, the amount of a commodity sold in the market depends on its volatility. People believe that the current as if they are holding will also play a huge role. If they believe that it will become a less risky asset in the future, they may invest more money into it. On the contrary, if they believe the commodity to become riskier in the future, they start to sell it off in the market.
Now that the geographical situations of the whole world are not addressed, certain things are happening. Recently, the world just got out of a global pandemic, and now, the United States is deciding to increase inflation. Along with this, many business organisations face many risk factors. And, on the top, there is a special military operation going on in Europe, which is an alarming situation for every kind of market.
Bitcoin to become a risk-off asset!
According to the chief strategy officer of coin shares, the recent few weeks have been exciting for crypto investors. It is the conflict between western and eastern Europe, but many Canadian truckers have lost their access to the banking systems. Therefore, a lot of money was converted into bitcoin and cryptocurrencies in that region, which has led to a bungled up situation in the crypto market.
She also mentioned that bitcoin and cryptocurrencies are not a political money system. Therefore, we can only see that the trading activity in Ukraine and Russia is increasing just because of the devaluation of United States dollars. Hence, in future also, we can expect the same. As a part of it, the United States nationals are no longer interested in the crypto coins because of increasing regulations from the government. So, we may soon experience a time when bitcoin no longer remains a risk-on asset.