The last few days’ significant surge in the price of Bitcoin could only be the beginning, according to a recent MarketWatch piece. Specifically, the report highlights how an investment in Bitcoin can be seen as a hedge against central bank policy.
Kling: Policy uncertainty will benefit cryptocurrency adoption
The MarketWatch report also predominantly featured an interview with the founder and Chief Investment Officer of cryptocurrency asset management firm Ikigai Asset Management, Travis Kling.
Kling argued that the main driver behind the recent upwards trend in cryptocurrency prices could, in fact, be banks. Moreover, Kling suggested that the increased discussing regarding central banks could have opened more consumers’ eyes to cryptocurrencies.
”We had the Fed do a complete U-turn into dovish mode, then everyone else followed [the European Central Bank and Bank of Japan]. We now have this set up where they [the central banks] have become politicized both in the U.S. and globally. It’s the new world we are living in.”
Furthermore, this comes as cryptocurrencies are increasingly being recognized as an alternative to fiat currencies and central banks. As such, cryptocurrencies can be seen as a bet of sorts against traditional monetary policy.
Kling went on to highlight the potential problems posed by large-scale fiscal deficits, in combination with quantitative easing constituted a massive ”financial experiment.” In addition to this, he also noted that Bitcoin – in particular – is becoming ”a hedge against irresponsible monetary and fiscal policy.”
Bitcoin allows investors to diversify against policy errors
Consequently, Bitcoin – and cryptocurrencies in general – provide investors with an effective way to diversify their investments against potential policy errors and, in extension, problems related to the traditional monetary system.
Moreover, ThinkMarkets UK’s Chief Market Analyst, Naeem Aslam, made similar comments in relation to how cryptocurrency can be boosted by central bank policies. Specifically, Aslam suggested that this will paint Bitcoin as an attractive alternative.
”I am not saying that fiat money is going to vanish, but the way the central banks are managing the monetary policy, and levels of government debts, are going to bring the shine in the Bitcoin price.”
As always, it remains to be seen whether policy uncertainty and suspicions of the traditional monetary system will continue to drive Bitcoin and cryptocurrency adoption according to Aslam and Kling’s prediction. However, with today’s volatile political climate, it seems as likely as ever that this could be the case.
Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.