Category Archives: Liquidity

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Grayscale: Bitcoin is Hedge Against Global Liquidity Crisis

Grayscale_ Bitcoin is Hedge Against Global Liquidity Crisis

Digital Currency Group’s investment fund Grayscale Investments has published a fresh report that supports Bitcoin as a potential alternative to hedge against any global liquidity crisis.

Examining five recent “macroeconomic shocks”, the report gives clear evidence of Bitcoin outperforming other investments as a store of value. According to the authors, case studies were able to extrapolate these events: Grexit, Brexit, Chinese yuan devaluation and two Trump shocks. They showed that investors could help protect their portfolios from these economic failures simply by diversifying into Bitcoin.

The report’s authors, according to CoinDesk, say that the world’s most used crypto should be considered to have a position of strategy within investment portfolios. Its transparency, immutability and liquidity gloablly is enough justification for this. This does not even mention other unique properties which differentiate it from any other class of asset, allowing it to perform in turbulent market cycles as well as in average economic conditions.

Grayscale also says that policymakers and leaders will find it more and more challenging to manage state economies as monetary, fiscal and trade policies globally enter a period of change, and investors will feel the need to take control of their own financial destinies, adding the impetus for Bitcoin.

In the case study ‘Grexit and the 3-week Greek bank shutdown’, the authors determined Greece went into a liquidity crisis thanks to defaulting on sovereign debt. This led to a closure of national banks and strict capital controls for only three weeks as the nation negotiated with international creditors — sparking debate about centralized states holding too much power over holders of centralized assets.

The Grayscale authors point out:

“…during the liquidity freeze, Bitcoin emerged as one of the only means by which to transfer value in or out of Greece, reinforcing this new asset’s ability to return the power of control to the individual who holds it.”

Prior to the resolution of Grexit, Bitcoin gained 28% versus a negative 1.7% performance with 20 other markets and currencies.


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Bank of Korea: CBDC Could Threaten Commercial Bank Stability

CBDC Could Threaten Financial Stability of Commercial Banks, Says Bank of Korea

The Bank of Korea (BOK) has said that the introduction of a state-owned and issued digital currency in the form of central bank digital currency (CBDC) in South Korea could possibly zero-out commercial banks, reports Yonhap News Agency.

According to the source, the BOK published a report expressing concerns with low deposits demands into commercial banks that may result from the implementation of a state-backed CBDC into the financial system.

Kwon Oh-ik, one of the co-authors of the report, wrote: “The CBDC is a kind of a BOK-issued bank account. People trust it more than one in a commercial bank”. This implied that as customers are likely to trust the blockchain-based currency type backed by the BOK as opposed to the legacy form of money transfer and handling, this might lead to low liquidity in such commercial banks as customers withdraw their money. This would invariably shoot up interest rates.

Commercial banks are largely dependent on the loan infrastructure and if deposit services reduce, making it hard for the banks to have access to liquid cash for loan maintenance, then interest rates will then go up. Invariably, that may reduce patronage and consequently reduce the businesses of such banks.

Banks around the world have been discussing different application models for blockchain and cryptocurrencies. One such possibility involves CBDC, and talks about facilitating cross-border payment infrastructures. Banks have identified CBDCs as a government type of cryptocurrency which will constitute the exactness of a fiat currency.

At last, one thing some central banks around the world and crypto-enthusiasts could agree on is that a digital asset built on the blockchain could represent a store of value as well as a medium of exchange, and possibly capable of replacing the legacy fiat currency formats.

A CBDC could play a significant role in mass adoption of cryptocurrency. However, as exciting as that may sound for Seoul-based crypto enthusiasts, the South Korean central bank has a differing opinion.

The bank did say last week that it is not rushing into issuing a CBDC even though many financial institutions around the globe are more welcoming to the prospects of the financial instrument. The report published by the bank further reiterates its stance on the subject of CBDC.


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Liqui Shuts Down Exchange, Citing Liquidity Issues

Liqui Crypto Exchange Shuts Down Operation

In an announcement earlier yesterday, Ukraine-based cryptocurrency exchange Liqui told its remaining loyal users that it can no longer provide liquidity to support trading activities on its platform.

As implied from the statement in the announcement, “We gave you the right to decide whether you want to be with us in our Crypto Exchange journey by accepting the changes”, it appears that the exchange had been struggling with liquidity for quite a while, and had resulted in some form of policy changes that depended on the consolidated support from its user base. However, the outcome may have come short of the expectations of the operators of the exchange.

Amid the prolonged bear market trend of 2018 which spilled into 2019, many crypto businesses have found it hard trying to survive. The decline in the service operation of the exchange may have started alongside the decline of the entire crypto market in general. However, it got intense towards the latter part of 2018. Within the space of a month, it had delisted 25 crypto assets from its trading platform.

Further, the exchange has made provisions for users to withdraw their funds with the exchange by going through a support desk. They have also assured that the process will continue for the next 30 days.

At press time, Liqui was ranked #206 based on 24-hour volume and had a listing of about 182 cryptocurrency trade pairs with volumes of USD 23,238 according to data from CoinMarketCap.

Many exchanges have been having it hard to maintain liquidity, as digital assets themselves have had it tough this past year. Security is also among the top concerns.

A South Korean assessment of cryptocurrency exchanges found only 7 out of 38 exchanges meeting the required security expectations. It is worth noting that there are about 230 cryptocurrency exchanges tracked by CoinMarketCap.

Recently, a proof of keys event started by Trace Mayer led to the speculation of alleged freezing of users accounts by HitBTC exchange, although the accusation was denied by the exchange. However, a step back by traders to reevaluate their options would help them apply due diligence before proceeding to decide on which exchange to trade on.


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Mt Gox Civil Rehabilitation Claims Deadline Extended to Boxing Day

The deadline for the civil rehabilitation claims for the defunct Japan-based Mt Gox exchange might be extended till 26 December, says trustee Nobuaki Kobayashi in a document released yesterday. It states: “If filings are delayed for reasons not attributable to creditors, proofs of rehabilitation claims filed after the deadline (i.e., 22 October 2018) may be acceptable.”

The previous deadline of 22 October for the submission of claims has already been exceeded but considerations are being made for the global distribution of creditors and extended time necessary for filing documentation. The current terms for the extension to creditors appears to allow creditors who are yet to submit their claims to do so on or before the new date of 26 December.

The decision is still subject to the rulings of the court if the deadline is exceeded and more submissions are still being received. The Rehabilitation Trustee does note good faith by promising to make efforts to appeal to the court to accept the proofs of rehabilitation claims filed after the original date.

The document further requested the creditors of the exchange to submit either an online or offline copy of the claim with their appropriate seal or signature. A guideline has also been provided to aid the process of filling the form.

The Mt Gox hack still remains an indelible moment in the history of cryptocurrency trading, with some BTC 850,000 stolen from the exchange.

The exchange began the collection of claims on 23 August, The tentative date for the repayments is set to happen sometime after February 2019 with no specific date announced yet.


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