Bitcoin's Turning into Insurance Policy Against 'Irresponsible' Central Banks, Analyst Argues

  • Bitcoin (BTC) could help hedge against "irresponsible" monetary policies used by central banks, analyst claims.
  • Investors may lose confidence in traditional financial instruments due to poorly managed economic policies.

Travis Kling, the founder and chief investment officer at Ikigai Asset Management, a digital asset hedge fund, recently said “there is a really a good chance we have something better than gold.”

Kling, a former portfolio manager at Point72 Asset Management, explained that bitcoin (BTC) investments may be comparable to credit default swaps (CDS), which are similar to insurance policies that issue payouts when borrowers default on debt. Referring to a CDS as a traditional hedge “against fiscal and monetary policy irresponsibility”, Kling noted that the “mass adoption” of alternative forms of investments (as a hedge) such as bitcoin could occur in economies suffering from hyperinflation.

During the Wall Street financial crisis in 2008, investor confidence in CDS fell to an all-time low as the American International Group (AIG), a New York-based global finance and insurance corporation and one of the largest issuers of CDS, almost collapsed.

At present, Kling is concerned by the increasing US debt (which stands at roughly $22 trillion) and the seemingly drastic measures taken by the Federal Reserve and the central banks of other nations to stimulate economic growth. According to several analysts, consistently low interest rates coupled with an increasing budget deficit might result in hyperinflation - which would essentially erode the value of fiat currencies including the USD.

"Writing The Script" For "Mass Adoption"

"That is how you would write the script" for the "mass adoption" of a new type of currency or asset class that isn’t backed or controlled by centralized world governments, Kling argued. His comments came during a Cayman Alternative Investment Summit held in Grand Cayman, the largest of the Cayman Islands, a British Overseas Territory in the Caribbean.

Notably, digital asset startups have continued to attract investments even during the prolonged crypto bear market which is now the longest in history. Morgan Creek Capital Management has announced the launch of a cryptocurrency fund that is scheduled to complete its initial fundraising round this coming Friday. Mark Yusko, Morgan Creek’s founder and CEO, explained that the new fund will focus on the “pick and shovels” of the crypto space and on projects working to help improve the ecosystem’s infrastructure.

According to Yusko: 

[Morgan Creek Capital Management] believes bitcoin will be one of, if not the, largest network on the planet. We are in the middle of the greatest wealth opportunity ... It's beyond any of our imaginations.

Morgan Creek To Invest In Blockchain-Based Insurance Platform

As noted by CNN Business, Morgan Creek is investing in a firm that aims to use blockchain technology to streamline the title insurance business. Traditional title insurers usually require that clients submit a lot of paperwork in order to verify property ownership and transfers. However, a blockchain-based title insurance system would significantly reduce the amount of paperwork involved and eliminate costly intermediaries from the process, Yusko claims.

Criticizing the traditional insurance claims process, Yusko remarked:

Title insurance — it's just a stupid business. Why do we need to pay $1,000?

As Tether Premium Disappears, Bitfinex and Ethfinex Launch New IEO Platform: Tokinex

Avi Rosten

Prominent exchanges Bitfinex and Ethfinex have announced a new IEO (Initial Exchange Offering) platform.

The new platform, Tokinex, allows users to participate in pre-vetted token sales from new projects listing on the site. In a departure from other similar offerings such as Binance Launchpad, token issuers on Tokinex don’t have to pay any upfront fees for listing, while successful launches on the platform will also benefit from listing on both Bitfinex and Ethfinex.

The new exchange also utilizes the KYC service from Blockpass, which allows customers to complete KYC verification but without storing data on the exchange. The first token sale will be announced on May 23rd, with the sale taking place on 13th June.

Will Harborne, founder of Ethfinex, told CryptoGlobe:

Tokinex has been several months in development, incorporating feedback, testing and learning to reach a quality level users have come to expect at Bitfinex and Ethfinex. It has been carefully crafted to put the user experience front and centre, from incorporating Block Pass for KYC that is easy to use and does not store personal data, to being able to contribute existing assets directly from the user’s own wallet, rather than having to purchase a native platform token to participate.

IEOs in 2019

This latest platform from Bitfinex adds to the growing list of IEO platforms that have followed Binance, including OKEx, Huobi and Bittrex.

For Bitfinex, the news comes in the aftermath of fraud allegations in April from the New York Attorney General against Bitfinex and Tether, over alleged losses of over $850 million. However, the Tether Risk Premium, - a measure of how much the market believes Tether to be riskier than its underlying USD - has since almost completely disappeared, suggesting that investors at the moment have little concern over Tether’s value.

This is likely due to restored investor confidence in Bitfinex and Tether, after Bitfinex CTO Paolo Ardoino revealed on May 13th that the company had raised $1 billion in a private token sale. The chart below shows the impact of the announcement - with the premium on the BTC price on the Bitfinex Exchange narrowing to zero following several weeks where bitcoin was trading above its spot price.

Bitfinex Premium Narrows