Recent weeks have triggered fears about the possibility of an upcoming global financial crisis. Between Trump’s trade sanctions on China, the stock market hitting year-to-date lows, and the bond market flashing a recession warning, more and more investors are turning to Bitcoin as their safe haven asset.
Earlier this month, China devalued the Yen against the dollar after Trump threatened another 10% tariff on Chinese imports, according to Markets Insider. The decreased value of the Yen and increased tensions between China and the U.S. then became part of the U.S. stock market plunge to the lowest index all year.
The recent plummeting of the stock market has sparked widespread fear that the economy is approaching another recession, especially as last week’s bond market produced an inverted yield curve. What does this mean? Short term bonds are currently returning more than longer term bonds, which is a bad indicator for the current state of your dollar within banks nationwide– they need more money, fast.
What’s the big deal? The sheer fact is that every recession since 1956 has been preceded by an inverted yield curve in the bond market.
So, what happens next? Financial armageddon? There is still hope. These recent events are potential rocket fuel for Bitcoin and cryptocurrencies to thrive off of. As the Bitcoin network grows, it is becoming less and less correlated with the U.S. dollar, and more correlated to safe haven assets like gold, as it has been over the past 100 days, according to Markets Insider. As Investors are being turned away from potential losses within the stock market, they seek an asset that they can depend on, and trends seem to be pointing more towards Bitcoin as a long-term store of value.
In the midst of fears for the worst, Bitcoin continues to push new highs even after the July scare of U.S. crypto-regulation that dropped Bitcoin 18%. In the past two weeks, Bitcoin has recovered back to $12,000 twice and continues to test bullish resistance marks.
As Bitcoin continues to test the market to find a price and value that investors are comfortable with, the asset is becoming more of a widespread store of value, which looks like a promising idea after the recent interest rate cut by the Fed that took value away from the future of your dollar.