Demand for non-sovereign ‘safe-haven’ assets, such as bitcoin (BTC) and gold, will increase significantly as the risk of a broad currency decline increases, according to the US-based crypto research policy Delphi Digital.
Demand for gold has already risen among central banks and private investors in the past 12-18 months, with total holdings of gold-backed exchange-traded funds (ETFs) and comparable products just hitting a new high of c. 3,355 tons, the company said in their latest report.
In addition, Delphi Digital sees an increase in demand for uncorrelated alternatives that will be triggered by the growing investor awareness “of the secular headwinds facing growth assets”.
According to the researchers, global policymakers are on the alert because of ‘extreme monetary intervention’, especially that of the Federal Reserve System (Fed). The amount of the monetary and fiscal support pledge equals more than $ 10 trillion worldwide, while the Fed has added more than $ 2.5 trillion to its balance sheet in the past two months alone.
Also the European Central Bank said in March that the “Governing Council will do everything within its mandate” to help the euro.
However, most countries don’t have the luxury of actively issuing an alternative that has at least modest demand, Delphi Digital emphasized. Therefore, the demand for USD allows the Fed to do greater intervention than other central banks. Nonetheless, “the weakening sentiment toward US dominance has prompted several outspoken political leaders to seek alternatives to the current US dollar standard, which could threaten demand for US Treasury bills at the most inappropriate time,” it said.
That said, the company believes that Bitcoin is a “very attractive” alternative when it comes to a multi-asset portfolio, with the aim of maximizing risk-adjusted returns. Volatility works both ways: there is higher upside volatility, therefore high drawbacks are expected. In addition, the features of BTC as an alternative safe haven are superior to gold and other precious metals in a number of ways, the report claims, and these benefits will only become more important in a digital asset-dominated world, giving BTC greater market share compared to are traditional counterparts.
In addition, countries that continue to cut interest rates are likely to scare investors and analysts away, worried about local currency instability. Much of the money coming from emerging markets is likely to go to dollar-based assets, but “the sheer magnitude of this potential move could be another source of demand for BTC, especially as tighter capital controls become commonplace,” the report concluded.
As reported, prominent hedge fund manager Paul Tudor Jones said that 1% is -2% of his assets in BTC, which could amount to a minimum of USD 210 million.