Raoul Pal, a former senior executive with Goldman Sachs believes Bitcoin hedge is a sound strategy against an impending global economic slowdown. Pal is a prominent economist and a Wall Street veteran, and he recently took to Twitter, the microblogging site to recommend buying Bitcoin.
Pal’s viewpoint is significant considering his vast understanding of the global economy. His opinion is also interesting from another angle, and that is how Bitcoin is perceived by many as a hedge against uncertainties.
At the time of writing, the global economy seems to be bracing for a slowdown. Various sectors in nearly all major economies are experiencing a downturn, and emerging market economies are affected too.
There are various reasons for this, and a key contributing factor appears to be the US-China trade war. Since important sectors like Automobile, Technology, Agriculture, and manufacturing are impacted, one can expect that this wave of the global economic slowdown will be quite noticeable.
Investors will naturally look to cushion themselves against a serious economic slowdown, and they will look for alternatives. Markets for stocks, commodities, foreign currencies, etc. might see collapses, therefore, investors could have a hard time to identify viable alternatives.
US treasury bonds, gold, US dollar are a few reliable options for investors in such circumstances. Pal’s recommendation to buy Bitcoin is interesting since it offers another option to investors.
Bitcoin hedge: An interesting option when economic slowdown looms
Bitcoin has an interesting history, to say the least! The 2008 financial crisis was a key factor that motivated Satoshi Nakamoto, the pseudonymous person or group behind Bitcoin, to create this digital currency.
As large banks and financial institutions failed, governments had to rescue them and taxpayers had to foot the bill. Large banks had made many questionable investment decisions that led to their failure, and people lost confidence in these financial institutions.
Nakamoto thought that a digital currency that operates outside the control of governments and central banks would keep people’s money safe, and he wasn’t the only one with such thoughts. Thus was born Bitcoin, and many market observers consider Bitcoin hedge as a viable option against inflation and financial crisis.
People conducting Bitcoin transactions submit their transactions after digitally signing them, and miners pick them up for processing. Miners are transaction validators on the Bitcoin blockchain network, and they use powerful computers that run large number-crunching operations for long periods of time.
The transaction validation process on the Bitcoin network is transparent, therefore, all miners can see whether a transaction is genuine. Proof of Work (POW), i.e., a computation-intensive consensus algorithm protects the transaction and data from cyber-attackers. All of these factors give a significant degree of autonomy to the Bitcoin network.
Will investors trigger a Bitcoin bull run?
As we can see, Pal’s recommendation to investors to protect themselves against a global economic slowdown by buying Bitcoin isn’t one-off. The idea finds resonance with several experts and observers, and we need to watch whether a Bitcoin bull run will unfold amidst the global economic slowdown.