The first cryptocurrency became the preferred asset for hedging risks in case of a possible U.S. default, along with gold and treasuries, ahead of the U.S. dollar, the Japanese yen, and the Swiss franc.
Bloomberg’s Markets Live Pulse study found that gold, U.S. Treasuries, and Bitcoin would be major assets if the U.S. government fails to raise its debt ceiling and defaults.
Bloomberg’s survey was conducted from May 8-12 among 637 respondents, including institutional and private investors. Most participants indicated that the upcoming meeting of U.S. President Joe Biden with Congress, scheduled for May 16, during which the U.S. debt ceiling will be discussed, makes investors consider hedging the risks associated with a possible default. Thus, financial experts said they would be ready to buy the following assets in case of default:
- Gold — 51.7% of institutional investors and 45.7% of private investors.
- U.S. Treasuries — 14% of institutional investors and 15.1% of private investors.
- Bitcoin — 7.8% of institutional investors and 11.3% of private investors.
Bitcoin for the first time became the third most popular asset that can serve as a hedge during financial market uncertainty. At the same time, both institutional and private investors consider BTC a more attractive means of savings compared with the U.S. dollar, the Japanese yen, and the Swiss franc. They believe Bitcoin can provide protection against potential losses associated with the collapse of the dollar and other traditional currencies.
BTC’s listing in the top three assets in case of a U.S. default is evidence of the first cryptocurrency’s growing role in the global economy and financial system.
The situation with the U.S. debt ceiling raises concerns in the markets. In early May, U.S. Treasury Secretary Janet Yellen warned of a possible catastrophic default by June 1 unless a decision is made to suspend or raise the debt ceiling. Biden also stressed that a default on U.S. debt would have serious consequences for the entire world.
According to Bloomberg’s survey, nearly 60% of respondents think risks are higher this time than in 2011, when the debt ceiling was already strained. 41% of respondents also believe that default directly threatens the U.S. dollar’s status as the world’s leading reserve currency.
Stellar CEO Denelle Dixon says stablecoins could strengthen the position of the U.S. dollar in the global financial market. However, analysts at the Cato Institute believe that the issue of CBDCs in the U.S. will only undermine the dollar’s international status.
