Digital Currency Revolution Series: Bitcoin Versus Bonds and Dollar Amid Global Crisis - Disparity Between Conventional and Digital Assets

Federal Reserve of the U.S. came up with interest rate cut for the first time since the 2008 financial crash. As a result, the U.S. markets retorted accordingly, subsequently, all three major indices dropped with a great deal.

While investors marched from equities to 10-year U.S Treasuries to bolt their portfolios. However, most surprisingly, a digital asset of the modern era has also joined this sentiment, yes, Bitcoin also surged from its monthly lows of $9,479 to $10k levels.

While articulating, the 10-year yield of Treasury Note was at a 1.6%, inching towards its historic low, although it is categorized as one of the most luring fixed income instrument in the world. 

While other fixed income instruments of the same tenors are also in a similar dilemma. That’s where, the level of global uncertainty that has muddled the conventional model for hedging. Contrary to the usual array of financial obstacles, the fixed income avenue has become unpleasant to own, posing with a puzzle as to how investors can safeguard their portfolios. Under such circumstances, Bitcoin showed a ray of hope for crypto-aspirants and emerged into this space as an optimal solution to the inverted yield curve as the pioneer cryptocurrency was conceptualized during the last debt crisis. Hence, it may function as a hedge against such a financial crisis in its entirety. 

Is the cryptocurrency, in reality, immune to inflation? It’s a feature of the low-inflation era that very few governments or central bankers want a strong currency. That’s just one considerable reason as to why Bitcoin is doing so well. Strong currencies depress inflation, at least temporarily, and if their impact on competitiveness is exaggerated, it’s still enough to make them take the blame for jobs being lost to other cheaper-currency producers. In the event of hyperinflation or total market collapse, it might end up more fungible than the local fiat currency.

Recently, the Chinese central bank ‘PBoC’ issued a statement in a response to the US' labelling China as "currency manipulator". The Chinese central bank defended that the CNY depreciation is largely due to change of market conditions, and blamed that the US accusations are groundless. While they made an announcement of approval from the state administrative authority to start working on a national digital currency in order to combat the uncertainty of Libra, as per the Chinese reports.

While Bank of England Governor appears to be bullish on Govt-Backed Digital Money. Replacing the U.S. dollar with a digital currency backed by the central banks could prove to be a boon for the international financial system and reduce the impact of U.S.-based economic shocks on the rest of the globe, Bank of England chief Mark Carney said Friday.

Amid global slowdown and mounting geopolitical tensions, the digital currency likely to “dampen the heavy-handed influence of the US dollar on global trade,'' on that grounds, BoE governor Mark Carney, advises that the evolution of upcoming monetary system has to have the intent to look after the sustenance by keeping a check on the potential impact of the US economy on emerging economies.