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On January 9, 2009, Bitcoin was born on the precipice of the worst global economic downturn since the Great Depression. As the subprime mortgage crisis triggered a series of bank bailouts and tumbled international markets into the Great Recession, Satoshi bootstrapped Bitcoin as an ostensible alternative to the system that precipitated this crisis.

Forged as it was in the fire of an immolated economy, Bitcoin has never weathered a macro economic disaster since. So, whether or not the cryptocurrency emerges as an investment hedge against such an economic crisis — like its physical counterpart in gold has done — remains to be seen.

This narrative, however, is beginning to be tested — and, some would argue, even affirmed.

The Digital Gold Standard?

Last week, President Trump escalated the U.S.’s trade war with China, announcing that Washington would jack up a 10 percent tariff on some $300 billion of Chinese imports. Trump said that the U.S. would levy the new trade tax come September 1, 2019, and increase an existing tariff on $250 billion in goods to 25 percent.

International and domestic markets reacted adversely. The DOW, NASDAQ and S&P 500 each dropped roughly 3 percent, and the Chinese yuan jumped above the 7-per-dollar threshold for the first time in 11 years (since the onset of the Great Recession), losing 1.5 percent of its value in a day — the largest drop in four years.

The macro instability has some analysts forecasting a currency war, while others have argued that this instability, along with the contingent trade tensions, will accelerate a looming recession. Trump has accused China, which has a seasoned history of manipulating its currency, of artificially dropping the yuan’s price in response to the trade war. This comes just a week after the Federal Reserve cut interest rates for the first time since the 2008 recession, while President Trump has hinted before that he sees weakening the dollar as a viable strategy for bolstering the dollar’s prominence on the global stage.

Meanwhile, gold has leapt to a six-year high and is up roughly 4 percent since last week’s news. Also, the bitcoin price is up nearly 20 percent since last week.

Bitcoiners have long harped on bitcoin’s viability as a safe-haven asset like gold, but it’s never had the opportunity to prove itself. Not only is the opportunity now presenting itself, but Bitcoin’s digital gold meme is panning out, according to American Institute for Economic Research editorial director Jeffrey Tucker.

“I’m pretty confident that bitcoin has emerged as a hedge against uncertainty, particularly in international markets,” he told Bitcoin Magazine.

An alum of Ron Paul’s 1980s Congressional staff and the Mises Institute, the Austrian economist believes that “this has been true since BTC hit $1,000 in late 2013.” Since then, it’s hooked the attention of investors looking for alternative instruments to the foreign exchange market and traditional assets.

“It’s been performing in a gold-like way now for some five years,” Tucker continued. “One might even argue that this is a main reason for the price rise, which is a bit surprising. The expectation that BTC would emerge as a normalize[d] medium of exchange hasn’t panned out, but the perception that it is a store of value has.”

Speculation on Speculation?

Though Tucker is a gold-bug-turned-Bitcoiner, other Austrian economics adherents are less than convinced.

“I don’t think it’s emerging as a hedge at all. I think there are speculators buying it to speculate that someone might buy it as a hedge,” notable gold proponent and vocal Bitcoin critic Peter Schiff told Bitcoin Magazine.

Though Schiff said that bitcoin “is able to replicate the properties that made gold a better form of money than other commodities,” he also said that “bitcoin [isn’t] a hard asset and … [isn’t] anything like gold,” arguing that it lacks gold’s underlying demand and utility as a commodity.

Bitcoin can’t be considered a hedge to weakening assets, he continued, because it’s too volatile; this would be akin to “jumping out of the frying pan and into the fire,” he claims. Adding that the yuan is “only down 2 percent since Trump became president,” he believes that Chinese investors are more likely to buy less volatile assets like gold, the yen and USD.

Chinese Interest in Bitcoin

“Nobody in China is going to buy bitcoin because they’re worried about the yuan losing value,” said Schiff.

But Primitive Ventures co-founder Dovey Wan disagrees.

“That’s definitely not true,” she told Bitcoin Magazine, calling Schiff’s view an “absolute.”

The China-born Wan has offered something of a lens for Western Bitcoiners to peep through into the investment habits and sentiment of their Chinese peers. In a recent CoinDesk article, for example, she clears up a number of misconceptions regarding the Chinese Bitcoin landscape, highlighting that bitcoin ownership is far from banned or dead in her home country.

While she admitted that it’s hard to quantify “whether Chinese capital is buying up the price or it’s primarily Western capital buying up,” she noted that over-the-counter trading options now feature a 1 percent premium on bitcoin’s price in yuan. This “says something” about demand among Chinese investors (premiums on the CME bitcoin futures indicate similar demand here in America, one Bloomberg analyst noted on Twitter).

Still, a 1 percent premium is nothing major, and Wan thinks it’s “dubious” that Chinese investors are leading bitcoin’s latest pump (she hasn’t ruled out macro instability as a contributing factor, but she’s wary about saying that China is leading the charge).

She told us that “not everyone holds bitcoin” and that it’s “more of a hedge for high net worth Chinese.”

To Schiff’s credit, retail investors are primarily interested in tether, according to Wan, which she described as “a USD proxy with much better accessibility.” She also said that she’s confident the recent jump in gold can likely be attributed to Chinese investors looking for a hedge, as well.

Those high-net-worth investors, though, still view “bitcoin [as a] relatively long-term hedge toward systemic risk,” and this narrative has become increasingly legitimized in investor eyes in recent memory.

“[People are] definitely less skeptical compared with two years ago,” she said. “A simple data point” to reference, she continued, is that Bitcoin discussion groups on the popular messaging app WeChat now include legacy investment bulls like Sequoia Capital managing partner Neil Shen.

While Schiff holds that only a “minority of Austrian economists” have any interest in Bitcoin, Tucker believes that the legitimizing trend Wan has noted in China will inevitably spread through global investor circles. Though some critics, like Schiff — who has known about Bitcoin since 2013 — may never be convinced.

“I would like to think that price trends and adoption will win over skeptics. But I’ve believed this since 2013 and the same skeptical voices keep reappearing. Now I’m rather skeptical that empirical reality matters to the crypto incredulous,” Tucker said.

Recent market trends may corroborate Tucker’s notion that the digital gold narrative is beginning to win over retail and institutional investors alike. Square’s Cash App, for example, hit a record $125 million in revenue for Q2 2019 — doubling what it had made the previous quarter. Grayscale Bitcoin Trust, an institution-tailored bitcoin investment vehicle, recently hit an all-time high of $2.8 billion in assets under management.

This growth and bitcoin’s price rising amidst traditional markets wavering seem to align with talking points that as an asset decoupled from macro markets, bitcoin could emerge as a safe-haven asset like gold. So far, the narrative is holding up, but it will likely take a full-blown recession for us to really see how robust this theory is in practice.