Bitcoin, a 'Risk Asset', Is Reborn As a 'Safe Asset' in 'Strong Dollar' Era

Despite the collapse of the asset market due to 'strong dollar' phenomenon, Bitcoin (BTC), referred as a 'risk asset', is showing a great price defense.

In late September, the value of the dollar, considered as a typical 'safe asset', recorded the peak amid inflation still sweeping the world. In the last week of September, the U.S. stock market, which was a symbol of 'U.S. capitalism', collapsed sharply, led by Apple's 5% decline. It wasn't just the U.S. stock market. Due to the characteristic of 'global village', the value of other countries' legal currency and Asian stock markets has been on a noticeable decline in September, creating a weak collapse of the global asset market.

The collapse of the global asset market directly led to the influx of capital invested in the global asset market into the 'world's safetest asset', U.S. dollar. In fact, the word 'strong dollar' had been showing surprising strength. According to data released by Investing.com, the dollar succeeded in increasing its value by up to 8% compared to August. The value of money, not investment products, showed a double-digit increase.

# In the Era of 'Strong Dollar', Bitcoin's Revolt As a 'Risk Asset'

Amid the collapse of the global asset market due to the 'strong dollar', there is a phenomenon that has caught the attention of many investors. It is a stable price defense phenomenon of Bitcoin, which was considered the highest peak of 'risk assets'. Bitcoin, a risky asset, fell helplessly in the bearish market that began in the first half of this year due to the global macroeconomic situation, hitting $19,000 in September. When the 'strong dollar' began to stand out, Many experts predicted a 'sharp fall' of Bitcoin. Many investment experts predicted that bitcoin will fall to as much as $10,000 or as little as $13000.

At a time when the disastrous expectation for Bitcoin had been suggested, Bitcoin has been showing signs of maintaining the $19,000 level by establishing a solid price defense. Bitcoin's miraculous defense has left many wondering beyond surprise. "How Bitcoin keeping its price?"

# Empire That Has Never Been Sunset, Chose Bitcoin

An interesting article was published on 26. Sept, when the British pound's four-year plunge hit a new low. It is said that the phenomenon of Bitcoin greatly increasing the number of cases of purchases in UK that happened while the pound's value plunged. According to the article, the total amount of Bitcoin purchases in sterling on cryptocurrency exchanges in the UK recorded about $881 million. The average daily purchase of Bitcoin in the UK was about $70 million, an increase of 1150% per a day. It is the fact that many British people who were very afraid of the decline in the value of the pound sold their own pound and started to buy Bitcoin.

# Despite 'Strong Dollar','Limit of the Dollar' Lead to Stablecoin's Prosperity

Meanwhile, amid the collapse of the asset market, some suggested that Bitcoin's defense tax heralds a shift in Bitcoin's market, not just price defense.

Bank of America (BoA), the largest bank in the U.S., claimed that an increase in stablecoin's inflow of funds will create a positive market for Bitcoin. Bank of America's report on the 27. Sept pointed out, "the increase in funds flowing into stablecoin for three consecutive weeks means that investors defend their assets due to the strong dollar phenomenon, and later these funds are exposed to cryptocurrency and gradually increase their purchasing power." In other words, stablecoin placed on the exchange is used as a 'key currency' for cryptocurrency transactions, and accordingly, it revealed that the capital inflow of stablecoin will eventually lead to the bull market of cryptocurrency.

An additional consideration amid the strong dollar phenomenon is the 'convenience' of stablecoin against the physical dollar. Many people want to buy dollars according to the strong dollar phenomenon. However, depending on the country, there are complicated processes and limitations such as the dollar purchase limit, the complex identification processes. Moreover, at a time when war and the financial crisis are approaching reality, large purchases of dollars are a very difficult option for many around the world. However, the stablecoin, which allows easy purchase and remittance with a few clicks while keeping the value of the dollar intact, has been in the spotlight by many people in the world.

The inflow of funds from stablecoin does not simply mean the growth of the stablecoin market. Stablecoins placed on the exchange can be used as a 'reserve fund' for purchasing cryptocurrency with investment value when the bear market ends and the bull market comes. Therefore, the growth of the stablecoin market can be interpreted as a preview of the growth of the cryptocurrency market.

# 'Digital Gold' Bitcoin, Shooting out Buds

However, at a time when the global economy is in danger, Bitcoin may seem to reverse the cycle of the asset market only with the unique value of Bitcoin itself. In June, a gold mine capable of mining about 31 million tons of gold was discovered in Uganda, Africa. About 12 trillion dollars worth of gold can be produced additionally. This means that the largest gold mine on Earth has been rediscovered and that gold can no longer serve as a 'safe asset' with its inherent finiteness. The growth of technology to mine more gold in gold mines also reduces the value of gold. These facts are becoming a significant 'game changer' that tarnishes the value of gold, which has long been classified as the largest safe asset by its finitenessin human history. In addition, as the war came to reality in the global village in 2022, the mobility and value storage of heavy gold bars began to be reevaluated. The world's largest Bitcoin adoption rate seen in Ukraine is by no means a coincidence. This means that Ukrainians in wartime situations have begun to accept the convenience and value storage of Bitcoin, a 'digital gold'.

Bitcoin's great price defense is never a coincidence. This means that Bitcoin, which was classified as a 'risk asset', is now reborn as a true 'safe asset', as a 'digital gold'.

권승원 기자 ksw@