Global negative-yield bonds currently exceed $17 trillion, making investors extremely nervous. This forces them to focus on non-traditional assets such as bitcoin.
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Investing in bonds and holding them until maturity will inevitably result in losses
Investors are increasingly worried because they see rising negative-yielding bonds that are changing the global economy. According to Bloomberg News,
“The stock of global negative-yield bonds is now more than $17 trillion, as rising market volatility provides additional momentum for this year’s unprecedented bond rally.”
In fact, the reverse yield curve shows that investors are no longer betting on the future of the global economy. When the interest rate of short-term bonds is higher than the interest rate of long-term bonds, a reverse curve is formed.
Although this is not always the case, the reverse yield curve heralds a recession. However, since 1955, whenever the US economy has experienced a recession, the yield curve has reversed.
The escalation of Sino-US relations has intensified global uncertainty. The trade war has seriously affected investors' confidence in the future of the world economy. Investments that are generally considered to be less risky are no longer the case. As Forbes pointed out,
“30% of investment-grade securities now have yields below zero, which means that those who buy bonds and hold them to maturity will certainly suffer losses.”
Therefore, as the economy weakens, some observers expect investors to begin to turn their attention to less traditional assets such as Bitcoin.
“This is an exciting time for Bitcoin”
In contrast to stocks, bonds and other financial assets, Bitcoin remains strong and healthy. In fact, interest in investing in bitcoin-related financial instruments continues to grow.
Specifically, the Chicago Mercantile Exchange (CME) Group's bitcoin futures contract volume is reaching record levels. To this end, Tim McCourt, Managing Director of CME Group and Global Head of Equity Products and Alternative Investments, said:
"This is an exciting time for bitcoin futures and cryptocurrency assets. Investors have a broad interest in cryptocurrencies and are increasingly interested in the various applications of cryptocurrency and blockchain technology. ”
Due to investor interest, Fidelity, TD Ameritrade and other financial institutions are also facilitating bitcoin futures and developing new products.
In addition, new companies continue to enter the cryptocurrency market. As reported earlier, the New York Financial Services Department (NYDFS) is providing a license to allow Bakkt to operate as a limited liability company (LLC). As a result, Bakkt may soon begin trading bitcoin futures for physical settlement.
Another indicator of the robustness of Bitcoin is its record high network computing power. In addition, companies such as Bitcoin are increasing their investment in mining technology to improve the computing power of mining machines. Bitcoin expects that the total network power will increase by about 50% in the coming months.
Most importantly, as a micropayment system, the future of Bitcoin looks brighter. Due to the emergence of new technologies, one of its main obstacles – the high transaction fees – has become a thing of the past. The current handling fee for Bitcoin has fallen by 88% compared to the peak of the bull market in December 2017. In July 2019, Blockstream announced the v0.7.1 version of C-lightning, which promised to make bitcoin lightning network transactions cheaper, faster, and safer while reducing bandwidth consumption.