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Economic Depression is Coming, and Bitcoin Could be the Best Hedge

Bitcoin Could be the Best Hedge | Unicoin Digital Capital Exchange

Introduction

Economic Depression is going on in every corner of the world because of coronavirus, which has impaired the life of all human beings. Due to this economic problem, most businesses are in loss, and they are trying to survive, or they are trying to hedge. As much as a concern with the financial market, Bitcoin is advantageous over fiat currency in many ways, and this is also called digital gold because of its nature of safe haven.

Economic Depression

An economic depression is a continuous, long-term downturn in economic activity in one or more economies. Generally, there are many indications in an economic depression, like loss of jobs, loss in industries, bankruptcy, loss in currency values, a decline in the manufacturing sector, trade loss, and market crashes. Hopelessness opportunity and uncertainty about economic growth prevail, which is termed as economic recession. Ultimately, the GDP falls sharply.

Economic depression has been seen in almost all centuries, and the most recent was a great recession from December 2007 to June 2009, and this was caused by the subprime mortgage crisis. At the end of 2019, the Covid-19 virus was started spreading all over the world from the epicentre Wuhan China which led to recession worldwide in a very short period. Most economies were destroyed badly.

This Covid-19 recession is impacting human life adversely in personal as well as financial way. This recession is still going on and abolishing the economies day by day more severely. Many countries and world forum has been taking major steps to restrain the recession but consequences are still not palpable.

If we talk about the current situation, then every region is subject to substantial growth downgrades. As per World Bank, East Asia and the Pacific will grow by a scant 0.5%. South Asia will contract by 2.7%, Sub-Saharan Africa by 2.8%, Middle East, and North Africa by 4.2%, Europe and Central Asia by 4.7%, and Latin America by 7.2%.

Bitcoin Brief

Bitcoin is a cryptocurrency, and this is considered as virtual Gold also. Bitcoin was invented in 2008 by Satoshi Nakamoto. Bitcoin is a safer and secure way of peer to peer transactions, so this is very popular. Transaction cost is very low, and the speed of transaction is very faster as compare to other fiat currency as there is no involvement of the central bank or agency. Bitcoin is stored in a wallet where it is kept secure and safer. There are many types of digital wallets to store such digital currency, including Bitcoin, Ethereum, and Unicoin.

Bitcoin as a Hedging Tool

In December 2017, the CBOE and CME launched Bitcoin futures, thinking that, similar to other futures, this Bitcoin contract would deliver more price transparency, price discovery, and a risk management tool for Bitcoin. Many investors started investing largely around the world for their purposes, like as investors, portfolio managers, hedgers, and speculators as well.  

You may observe that when all equities, stocks, commodities, or currency were falling, then there was less impact on Bitcoin as compared to other financial securities, and this particular feature is making as a safe haven against inflation or downturn of economies. Therefore, investors are putting their money in Bitcoin to hedge their risk, which may be aroused from the equity market or currency market. However, many financial think tanks do not accept Bitcoin as "Safe Haven" due to its high volatility and lack of liquidity also.

Conclusion

Bitcoin is the most prestigious cryptocurrency over a decade, and its value is volatile. It has been proved that it's characteristic against inflation in somewhat manner and mostly in developing countries. As we know the economic downturn is going on everywhere, many investors are trying to hedge with the help of Gold or Bitcoin. That's the reason gold has gone historical high. In the same way, investors are considering Bitcoin as a safe investment against the current economic crisis

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