During times of financial crisis, gold prices typically skyrocket as traders move their money to safe-haven assets. In the latest Greek debt fiasco, however, the price of the precious metal has barely moved while bitcoin has surged in the past weeks.
There’s no doubt that the financial concerns surrounding the Greek debt crisis have started to weigh on equities and other higher-yielding assets all over the globe. What’s interesting, though, is that the flight to safety seems to have favored digital currencies rather than the traditional safe-havens.
Digital Currencies and Greece
One factor that has allowed bitcoin prices to rally in the wake of the Greek IMF default is the rise of online services that offer loans and investments in digital currencies, as well as those that claim to maintain economic connectivity by purchasing Greek products in bitcoin. After all, the capital controls imposed on the nation led to the closure of banks and a temporary halt in stock market trading, leaving the Greeks with not much options to move cash around.
In addition, citizens residing in other members of the euro zone have also reportedly move their funds to digital currencies, anticipating a potential threat to the shared currency’s existence. A default by Greece to the ECB could force the country out of the euro zone, which might then spark debt contagion and lead other member nations to question the stability of the region and the euro.
“We’re seeing about a 300 per cent increase in bitcoin buys across all Europe in the past few weeks (not much from Greece though, they aren’t able to)”, a Coinbase tweet said.
Changing monetary policies by several central banks, such as the People’s Bank of China, have also propped up interest for digital currencies. Just recently, the Chinese central bank secretly drained liquidity from the financial system then followed it up with a boost in reverse repos and interest rate cuts.