After tightening regulations around cryptocurrencies across the globe, the crypto flag could still soar amid news of Lebanon allegedly planning to forcibly convert foreign currency holdings to its floundering pound (LBP). So, will Bitcoin’s inflation hedge narrative uphold again?
What’s All The Fuss About?
A Reuters article reported earlier this week that it had seen a government ‘blueprint’ plan designed to fight the ongoing financial crisis.
It further revealed that the plan for tackling Lebanon’s financial crisis projects a 93% devaluation of the Lebanese pound and could convert the bulk of hard currency deposits in the banking system to local currency.
Further, the agency highlighted that of $104 billion worth of hard currency deposits, the plan foresees returning just $25 billion to savers in US dollars, with most of what’s left converted to pounds at several exchange rates, including one that would wipe 75% off some deposits. If the same is put into action investors could be at the risk of potentially enormous losses.
The plan also notes:
“High inflation will counteract all efforts to recover deposits as their real value and the depositors’ purchase power will decrease.”
For now, while the government allegedly plans to repay all depositors, it aims to do so over a time period of fifteen years. Amid the chaos, the crypto community remains optimistic that ‘Bitcoin could fix this.’
Can Bitcoin Make a Difference?
Bitcoin’s narrative as an inflation hedge is as old as the currency itself. BTC’s rising price, high ROI vs USD in the long term as well as its bettering image as a store of value has added to its narrative as an inflation hedge.
Earlier this month, Goldman Sachs analyst Zach Pandl in a research note to clients said that Bitcoin ‘will take market share away from gold in 2022’ as digital assets become more widely adopted thereby competing with gold as a ‘store of value.’
The Castle Island Ventures Partner Nic Carter believes that the Lebanon report was ‘a tale as old as time.’ The entrepreneur further said that it was ‘only a matter of time until crypto dollarization becomes the default and robs these central banks of their prime weapon.’
While many in the market are optimistic about the future of cryptocurrencies and Bitcoin in particular the market’s volatile price swings still play a spoilsport.
Further, over the last couple of months with the larger crypto market cap and the valuation of top assets like Bitcoin and Ethereum going down the same has also affected the larger narrative for digital assets.
That said, BTC’s yearly ROI vs USD at press time was merely +6.08% while its three-month ROI vs USD was -38.71%. So, with Bitcoin noting negative short-term returns at press time is BTC’s image as an inflation hedge still intact?
Well, the same remains to be seen. For now, while BTC was rejected at the $40K mark it could see a short-term pullback in price. Nonetheless, a move above the $40K mark could present a BTC recovery and put the investors’ train right back on track.
This article was originally posted on FX Empire