It would appear that the definition of Bitcoin as a “revolutionary instrument” should now be viewed in a new context. The most dominant cryptocurrency is gradually proving its usefulness not only as a store of value, similar to precious metal, hence the name “Digital Gold,” but also as a haven asset for people in the countries which are currently finding themselves amid political turmoil that resulted in massive street demonstrations.
Hong Kong is the latest example of this notion as the demand for Bitcoin on LocalBitcoins, the well-known peer-to-peer trading platform, has soared to extreme highs due to the political unrest caused by pro-democracy protests which sent tension in relationships with China into overdrive.
Understandably, the shaken-up investors in Hong Kong, who had been seeking a safe haven for their assets for the time being, opted for nothing other than Bitcoin. However, they had to cover a premium of 2%, in other words, overpay around $300 per bitcoin, compared to the prices throughout the world for the same period of time. It not only shows that the core rules of the market remain intact but also signifies the fact that begins to be perceived as a primary hedging tool in times of political and economic meltdown.
One should also take into account the fact that the described spike in demand among Hongkongers for the chief cryptocurrency happened on the background of a pronounced plunge in the BTC price which slid from the weekly highs of $11,843 to the lows of $9,763 in a matter of four days.
The outbreak of civil unrest in this special administrative region, which is generally referred to as the 2019 anti-extradition protests erupted after the government had issued a proposal to adopt the extradition bill that would have provided for the establishment of mechanisms for transfers of wanted fugitives to mainland China. The attempt at making such a controversial legal move took people on the street, who viewed it as a sure sign of the commencing decay of Hong Kong’s legal architecture.
The first such demonstration took place on June 9, with protesters demanding the resignation of Carrie Lam, the Head of the Government of Hong Kong. Even though the authorities had later suspended the bill, the protests kept on and even turned into clashes with riot police at the airport. The financial panic and the subsequent demand for Bitcoin has also been worsened by the reports concerning China amassing the paramilitary forces near the Hong Kong border.
It appears that we are entering a period when the volatility of cryptocurrencies, which has usually served as a major turn off for both individual and institutional investors across the globe, is now becoming less of a factor for capital holders in the developed and developing countries alike, in the face of the ongoing political and economic crises. This sentiment could also be instigated by the speculations regarding these disturbances being prerequisites to the global financial recession.
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