Hong Kong’s efforts to come out of an economic slump could send the crypto market flying, according to Jeff Dorman of Arca, a New York-based investment management firm.
The Chief Investment Officer envisioned a fruitful future for emerging crypto assets, especially the benchmark bitcoin, as he dwelled into the key provisions of Hong Kong’s latest budget. In a tweet published on Wednesday, Mr. Dorman said bitcoin will boom because of the Hong Kong government’s decision to distribute cash among people.
Breaking: Hong Kong permanent residents aged 18 and above will each receive a cash handout of HK$10,000 in a HK$120 billion relief deal. Follow our live coverage of the #HKBudget2020 here: https://t.co/QcBknq7Jtm
— SCMP News (@SCMPNews) February 26, 2020
A $15 Billion Stimulus Package
Financial Secretary Paul Chan Mo-Po confirmed in his budget speech on Wednesday that they would give each Hong Kong adult HK$10,000 (~$1,200) in cash. The deal came as a part of an HK$120 billion package that would also see the government offering a 100 percent guarantee to local firms taking low-interest loans.
The South Morning China Post reported that Mr. Mo-Po was under severe pressure to utilize Hong Kong’s HK$1.1 trillion reserves to pull the economy out of an ongoing slowdown. The Hong Kong markets took a deep plunge amidst anti-government protests and the latest Coronavirus outbreak.
But to Mr. Dorman, Hong Kong’s measure to protect the economy could make money worthless to the very people it is attempting to help. The fund manager compared it to the US’s $787 billion fiscal stimulus package against the 2008 recession that led to higher debt-to-GDP, noting that it would send people looking for a haven in crypto assets.
“Looking for the catalyst that propels bitcoin to new highs – it’s coming,” he said. “Just like in 2011, we’re about to see massive global, coordinated, gov’t stimulation. Monetary policy isn’t enough anymore; enter fiscal stimulus! Money is now worthless.”
Stimulus packages are full of drawbacks but one primary risk is saving sentiments. People who benefited from their central bank’s free cash might choose to save the money. It is opposite to what the government wants people to do: it prefers them to spend the cash instead to keep the economy healthy.
Mr. Dorman did not explain how Hong Kong’s $15 billion-stimulus could help crypto-assets like bitcoin. But it appears that the Arca executive hinted at the possibility of cash redirection: wherein people park part of their free money into bitcoin and similar assets – as a store of value. Historically, investors have used equities and gold for the same.
It is unclear whether or not Hong Kong citizens would venture into crypto tokens. But even a small fraction of them could help the sector grow exponentially.