Bitcoin trades at a premium in Hong Kong amid mass demonstrations

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Amid ongoing turmoil, investors in Hong Kong are paying a premium for bitcoin despite its price volatility. The spike in demand in the special administrative region stems from the growing perception that digital currencies can preserve wealth during periods of volatility for government-issued tender.

Why it matters: Continued mass demonstrations in Hong Kong over past months have led to significant disruptions in the economy. Digital assets, which are thought to be more politically neutral than fiat currencies, are increasingly treated as safe-haven assets in times of crisis.

  • Hong Kong has one of the most mature markets for cryptocurrency trading.
  • A large-scale switch to cryptocurrencies among wealthy individuals as a way to move funds offshore would be significant.

Details: Investors in Hong Kong were yesterday paying a 2% premium of $300 on bitcoin, which is higher than in other places, according to data from peer-to-peer trading platform LocalBitcoins.

  • Bitcoin prices plunged 8% to around $10,890 this week, posing risks to investors in troubled countries.

Context: Similar scenarios are playing out in China’s mainland along with other parts of the world, including Argentina and Venezuela.

  • The US-China trade war that strained the Chinese economy and the falling yuan has driven larger investors to digital currencies, Reuters reported. Signs of easing tensions may strengthen the Chinese yuan and cause the bitcoin price to drop further.
  • Venezuela, where the local currency continues to suffer from runaway inflation, saw bitcoin volumes soar to a record high last month.
  • Argentina‘s recent stock market crash and currency devaluation triggered by primary election results also prompted investors to buy digital assets. Bitcoin was trading at a 10% premium at one point.