Singapore-based DBS Bank talked about the current state of digital assets in its quarterly report on cryptocurrencies released in August. The most important detail in the report was the statements that the new type of coronavirus (Covid-19) pandemic will accelerate the adoption of Bitcoin (BTC).
It is interesting to hear such an observation from a respected multinational bank and its chief economist, Taimur Baig. However, lately there have also been rumors about some of the major financial institutions, particularly in places like Singapore, Switzerland, and Germany, which are creating a new wave of demand for crypto, leaching from smaller private banks and wealthy customers.
With regard to cryptocurrencies like Bitcoin (BTC), Baig identified two different demand phases. Before and after the pandemic. Pre-pandemic demand was largely speculative. “People have seen Bitcoin performing amazingly and wanted to be part of the game, so what’s wrong with investing 1% of assets in BTC?” Baig said in an interview. he said. Baig later said:
“I think the post-pandemic is beyond speculative. People are worried about the dollar outflow and wonder if they should keep cryptocurrencies in addition to gold as a safe haven ”.
They Repeat This View
DBS is not the only bank to notice this trend. Singapore-based digital asset bank Sygnum, which holds a banking license from the Swiss Financial Market Supervisory Authority, also echoed this view. Martin Burgherr, co-chairman of Sygnum Bank, says:
“Since the outbreak of Covid-19, the number of people who see digital assets as an alternative and a way to protect against an alarming risk of inflation has increased.”
Baig, who previously held senior economist roles at the Monetary Authority of Singapore, Deutsche Bank and the International Monetary Fund, likes to see the potential play of digital currencies and central bank digital currencies (CBDC) as a macro. Baig said gold was growing steadily, with steady income returns moving towards zero, and these conditions were causing “Bitcoin to come back quite convincingly”.
Makes Bitcoin Similar to Gold
It is tempting to look at bitcoin through the lens of one currency against the US dollar and another currency, the currency (FX). But Baig said this was wrong as a steady sovereign currency accepts economic assessment tools that determine productivity and long-term growth. Baig said:
“You cannot value cryptocurrencies this way. While they have that reliability with a system-based distribution, they are still not dependent on a country’s wealth. So, of course, they’re not going to go up and down the way the US economy goes up and down. In this respect, it looks more like gold than an FX to me. ”
Fixing to Dollars
For countries experiencing a currency crisis or a period of hyperinflation, pegging to the US dollar may bring short-term credibility, but this does not work well for many currencies. Baig said:
“If you look at Venezuela and even Lebanon, which is in the midst of a major financial crisis, at some point forward, would you think that instead of fixing your currency to the US dollar, you fixed it to a cryptocurrency?
Baig said there are possibilities provided transactions can be viewed on the blockchain.