Bank of America Merrill Lynch has conducted a survey on fund managers and found that pessimism in the stock market is at an all time high since the last financial turmoil.
The pessimism is being driven by the unending trade war between the US and its largest trading partners including China and an imminent global recession. However, the results could be good news to crypto believers as the pessimism could enhance Bitcoin’s image as uncorrelated asset.
Although the research gives a gloomy outlook, the three main US market indexes are almost to their all time highs. This has made some analysts to view Bitcoin as a niche product.
The survey involved 230 fund managers who have about $645 billion worth of assets to manage. 87% of the managers said that the US economy is in the third phase, late cycle, which precedes a recession.
As a result, many investors are preferring defensive trading where safer and more liquid assets are being favored. Michael Hartnett, Merrill Lynch Chief Investment Strategist explained:
“Fund managers are propelling a “huge rotation” into bonds and defensive sectors like utilities and consumer staples…While others are simply stockpiling cash, which saw the biggest jump since August 2011.”
This comes amid high rates of mistrust in government with only 17% of the respondents saying they trust the government.
Bitcoin As An Investment Alternative?
With a gloomy economic look and high number of people that do not trust the government, Bitcoin is being touted as the answer. Since it cannot be censored and operates on a non-inflationary monetary system, Bitcoin has the requisite qualities which are antithesis to the normal market parameters. But is it really the answer?
There are fears that cryptocurrencies are still in the development stage and have never been tested during a recession.
It is on this basis that Jan Loeys, a top analyst at JPMorgan, explains that cryptos can only be an alternative in extreme dystopian future. Loeys explained:
“We have long been skeptical of cryptocurrencies’ value in most environments other than a dystopian one characterized by a loss of faith in all major reserve assets.”
Loeys continued by explaining that the blockchain technology plays a complementary system’s role and not one that can replace the traditional systems in their entirety. He insisted that the technology will unlikely replace the conventional world payment mechanisms but rather offer marginal improvements to different parts of the entire process.
However, Loeys gave his views prior to JP Morgan releasing its own cryptocurrency. However, delving into Loey’s opinion in regard to a dystopian scenario, we can look at Venezuela’s case. During the hyperinflation witnessed in Venezuela, Bitcoin trading volumes increased rapidly as the populace lost faith in their country’s currency, Bolivar.
Keeping this in mind, although we cannot say how it will be in the future, we can comfortably predict that people will turn to Bitcoin when there are uncertainties in the global financial system.
- Source: First Appeared Here
- Published Time: 2019-06-19 21:23:08
The views and opinions expressed in the article Stock Market Pessimism May Boost Bitcoin’s Image do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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