As much as cryptocurrency is used across the world as a store of value, a means of payment and an investment tool, it has also come in handy for people to use in times of crisis, economic or otherwise, as shown by the example of Venezuela who launched their own national crypto after suffering from hyperinflation last year.
Now it seems crypto will work its magic in Hong Kong which is currently experiencing a tense political climate following protests against the proposed extradition law within the region. The law in question would give the authorities in Hong Kong the right to deport individuals suspected of criminal activities to the Chinese mainland. Protests are entering their second week and the atmosphere doesn't seem to be letting up anytime soon. The tense atmosphere has led to a feeling of unrest among the affluent Hong Kong residents who have taken to moving their wealth offshore in the event of any further crisis.
“Some Hong Kong tycoons have started moving personal wealth offshore as concern deepens over a local government plan to allow extraditions of suspects to face trial in China for the first time, according to financial advisers, bankers, and lawyers familiar with such transactions,”
As a result of this, bitcoin prices within Hong Kong have soared significantly and the token is now trading between $75 and $150 above the global average ever since the protests began two weeks ago. Besides the movement of funds out of Hong Kong and the soaring crypto prices, the region is facing liquidity issues as trade tensions are currently ongoing between China and the US and have not yet been resolved. Should this controversial bill be passed, it is believed that more people will move their capital out of Hong Kong which will further complicate their liquidity situation and harm the Citizens.
Hong Kong authorities, however, seem determined to push his bill forward and while it is being delayed for now due to the intense backlash and protests, the hope to push it to the legislative assembly soon. Ironically the state of unrest has likely contributed to bitcoin trading seeing a surge within Hong Kong with is currently trading $100 above the global average there. BTC/HKD trading volumes have steadily been going the last few weeks which shows that the problem is not just the capital outflow from HK but also the fact that people are hedging their funds against Bitcoin in the face of political uncertainty.
As much as many do not see value in cryptocurrency as the means of payment or a store of wealth, it has shown time and time again that it is an easy way to hedge funds in times of crisis as compared to certain other assets they are easy to acquire and much easier to move and store. This happened in Venezuela, is rumored to be happening in Italy in the next few years and now is taking place in Hong Kong. Clearly even the world governments have taken notice of the potential of cryptos to hedge against hyperinflation and uncertainty as evidenced by the cryptocurrency that was launched in Venezuela and hopefully the people of Hong Kong can find some economic solace in the same vein.