Summer of 2019 is definitely an unstable geopolitical period. With several flashpoints in terms of economics, security, and even technology, the year is shaping to be a period of change and thus treats. At the same time, the crypto scene is never blind to bing and tectonic changes. This is why some believe that the recent spectacular rise in crypto prices came from a sense of global instability.
But, after 10 years of crypto markets, this notion is something that many find dubious at best. However, being that no two time periods are the same, the idea of global instability as fuel for crypto price increase should be examined. This is important not simply to understand what did happen to the crypto prices at the end of June, but also what could lie in store for the cryptocurrencies and their users.
Sharp Rise in Volatility
Over the past couple of days, bitcoin has risen in price, but also in its volatility. This is in the view of most analysts the results of the overall improvement in market conditions. These conditions allowed BTC to surge from below $4,000 to a recent high that came near the $14,000. Out of these changes, a jump of over $4,000 occurred in less than one week and these things rarely happen on their own.
Instead, the first suspect is the recent Fed’s stance on the economy in the US that might have kicked off the rally. However, now is not the key question whether or not BTC is a safe haven as an asset – the process of Chinese devaluation of yuan that took place a couple of years ago already showed that there is no clear answer to this question.
Today, it is likely that the same dilemma is even more complex and no one can say for certain that moving fiat into crypto will be a definite way to save its value in times of instability. The wiser ones in the crypto community have already stated the same time and time again. Like in esports or general tech changes on the global level, there are no sure candidates for success. Instead, in the world of the early 21st century, most of the things that are novel and carry value are also incredibly volatile. Cryptocurrencies just represent the same trend in the clearest and most obvious manner.
But, it is not like a person who holds Apple stocks can be assured that they will remain valuable as much as they are today in five years. As this particular company shows, a single departure of a high-ranking designer can bring the value down fast. Saying that money is safer in crypto during instability in the traditional markets is bad advice and almost certainly one that would be proven incorrect in a short time frame.
Cryptocurrency as a Hedging Mechanism
Of course, the fact that crypto might not be a full-proof safe haven does not mean that it would not be useful during market instability. Most investors are beginning to see the logic in this approach and they are diversifying into crypto, even in using only fractions of their traditional portfolio. Additionally, it is clear that new buyers are flooding into the market for the first time en masse since 2017. BTC rapidly surged to $13,800 and this saw a big influx of selling pressure. It sent the price tumbling down and ended up a slap for the bulls.
Many of them were certain that the swim up will bring the price close to the important psychological barrier of $15,000. However, the famously unpredictable crypto pendulum swung backward and dropped the prices. Still, BTC had a strong recovery at $10,500 which is still a solid result for the crypto winter low values of late 2018. It did not take long to solidify at the $12,000 range.
Cause of the Movement
As mentioned, many traders noted the Fed position and the fact that the central banks are generally dovish in their outlook. This would easily translate into population seeking out bitcoin not as regular first-time adopters but as massive funds looking to relieve the pressure of the bad outlook in the traditional market. Analysts noted that this trend is completely expected, especially because the crypto is in a much more secure place than just three years ago. In other words, it survived its winter and now this is a plan for all to see.
The same occurred prior to the last record-breaking bull run, where bitcoin survived the Mt. Gox disaster and came out on top. Furthermore, the bleak outlook on the economy is not a huge surprise and has plenty of solid reasons that have been clear for some time. Firstly, the trade war between the US and China has been devastating for the global economy in many domains, even though the full picture might not be still clear. In spite of this, there is little doubt that the economy and finance expert see the darker clouds rolling in the distance if the confrontation continues.
Secondly, on the security issue, the standoff between Iran and the US is also a cause of major worry. Any flare-up of hostility could have devastating consequences and would almost certainly entangle the global economy as well. This is primarily seen with the issue of the Gulf of Oman and the fact that 40 percent of global oil transport goes through it. A surging oil price would almost certainly prop up the crypto prices. Add to this a number of regional crises like the one in Venezuela and the UK and a picture is bleak indeed.
Sunny Crypto Skies
No one can say with absolute assuredness that any of these are the smoking gun for the crypto price hike. However, there is a certainty that all of them did add to it to some degree. Further, few believe that all of them – or any, for that matter – will be resolved anytime soon.
All of this equates into sunny skies for cryptocurrencies, especially the biggest and most established ones. As the geopolitical and economic insecurities continue, crypto stands to benefit to some degree from all of that. Even if this simply coincides with the natural rise in prices, its presence will be welcomed by the crypto community nonetheless.