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Bitcoin’s Correlations With Global Financial Assets Soar Amid Coronavirus Crisis



Many investors hold Bitcoin (BTC) as a hedge against the global financial system. However, as the numbers show, Bitcoin has not been spared from the recent COVID-19 financial crisis.

This article will analyze the movement of global financial markets and its correlation with Bitcoin during the COVID-19 crisis. We’ll consider the following sources as price measures for the following.

The recent crash has really challenged Bitcoin’s claim as “digital gold” and puts its assertion as a financial “safe haven” to the test.

Related: Is Bitcoin a Store of Value? Experts on BTC as Digital Gold

A 21-day rolling correlation graph shows that Bitcoin has recently become increasingly correlated with other global financial assets. 

This statistic should be worrisome for cryptocurrency investors trying to find a respite in the midst of all the financial chaos.

Has gold fared any better?

Before we give “digital gold” such a hard time, we should note that physical gold hasn’t sheltered investors from this financial storm either. 

Correlations between gold and other financial assets have also soared during this time, signaling that the world’s financial markets are more interconnected than ever before.

The importance of low, or negative, correlation

Harry Markowitz, the father of the modern portfolio theory, postulated that the most important aspect of risk to consider is an asset’s contribution to the overall risk of the portfolio, rather than the risk of the asset in isolation.

Therefore, a portfolio is not riskier if it contains Bitcoin, which is a more volatile asset, and it is uncorrelated or negatively correlated with the other holdings in the portfolio.

Uncorrelated assets are the envy of portfolio managers because they can reduce volatility and improve risk-adjusted returns. Many portfolio managers keep Bitcoin as an alternative asset in their portfolio for this reason alone.

If Bitcoin does not remain uncorrelated with the rest of the financial market, then it may be viewed as a significantly less desirable, risky asset by asset managers and the institutional market. A decrease in institutional interest could mean large sell-offs and fewer fiat inflows into the market.

So far, this is not the case

Despite a recent uptick in its correlation, a portfolio comprising 80% stocks and 20% Bitcoin would have outperformed a portfolio of 100% stocks from a risk-adjusted return perspective within the last three months and also within the last year.

However, if we were to just look at the last month, Bitcoin would have been better off avoided.

It is true that Bitcoin has remained a relatively detached and uncorrelated asset in times of economic prosperity. But that is not enough. For it to be considered a true financial safe haven, it must be robust against shocks reverberating through other financial markets. Especially in times of turmoil, the asset’s performance should be placed under heavy scrutiny.

Hopeful for a rally

Nevertheless, Bitcoin’s recent price rally has shown signs of promise. This may provide hope to cryptocurrency holders — especially if other assets continue to tank.

Do cryptocurrency indices provide better diversification?

The HODL30 index, a portfolio comprising the top 30 cryptocurrencies by market cap, was less correlated to the overall financial market than Bitcoin. The correlation between the index and American stocks was significantly lower than the correlation between Bitcoin and U.S. stocks.

If cryptocurrency investors want to shield themselves from global market fluctuations, indices may become increasingly relevant.

Time will tell whether Bitcoin or any cryptocurrency will live up investors’ lofty expectations as a financial safe haven. In a tight-knit, interconnected financial system, such a thing may prove impossible. 

Perhaps the culling of fickle cryptocurrency investors during a time of crisis will leave only the strong and sturdy, dampening future volatility. Or, this price crash will set a precedent for investors to scramble for cash whenever the next financial crisis brews because Bitcoin can no longer be trusted to shelter them. 

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Anthony Xie is the founder of HodlBot, a trading tool that enables cryptocurrency investors to automate their trading strategies.

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Turkey Poised to Revise Bank Rule Aimed at Fueling Credit Growth




(Bloomberg) — Turkey’s banking regulator agreed to revise a rule aimed at compelling lenders to boost credit at a meeting with the industry’s top executives.

A revision to the asset-ratio rule by the regulator would be in line with requests from the banks, the people said, who asked to speak on condition of anonymity. The central bank was present at the meeting held on Thursday night.

The asset-ratio rule was introduced earlier this year to push financial institutions to step up lending, purchase government bonds and engage in swap transactions with the central bank. The regulation allowed the government to fine banks who can’t maintain an asset ratio of at least 100%.

The revision could mark an end to Turkish authorities’ push for loan growth, the people said. The regulator, known as BDDK, declined to comment.

Turkey Announces New Regulation To Boost Lending, Bond Purchase

The decision comes after the lira tumbled to a record low against the dollar on Thursday even though the central bank had spent billions over the past year propping it up. A series of jumbo-sized interest rate cuts and a campaign to get credit flowing to the economy to support growth has pushed the nation’s current account into a deficit, while risking a fresh bout of inflation.

Turkey’s Perilous Game With Financial Markets Reaches Crossroads

President Recep Tayyip Erdogan and Treasury and Finance Minister Berat Albayrak have repeatedly slammed private banks for failing to support companies even before the coronavirus outbreak paralyzed economic activity and curtailed the movement of people.

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©2020 Bloomberg L.P.

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China Tells Banks, Wealth Fund to Cut Pay as Economy Slumps




(Bloomberg) — Chinese authorities are doubling down on pressure to get the nation’s biggest state-owned financial groups to reduce salaries in a bid to boost returns as the virus-hit economy faces its slowest expansion in four decades.

Plans for limiting pay have gone out to entities including China’s massive sovereign wealth fund, its biggest bank and investment conglomerate, according to people familiar with the move who asked not to be named revealing private deliberations. The reductions will vary among firms based on a formula, but could reach an average of 30% at some companies, the people said.

Financial firms were first notified of the need to reduce pay last year and given details on how to make those cuts in early 2020, according to the people. Implemented, however, hasn’t been uniform with some institution acting more quickly than others, the people said. More recently, the ministry has begun pushing laggards to act, they said.

The decision could mean more money in government coffers for stimulus and marks another step in forcing its $41 trillion banking system to support the economic recovery even as the pandemic eases. Lenders including Industrial & Commercial Bank of China Ltd. have earlier been asked to cap profit growth to single digits, forgoing 1.5 trillion yuan ($200 billion) in earnings this year by offering cheap loans and cutting fees. They have also been told to roll over and defer payments on trillions of yuan in troubled loans to small- and medium-sized businesses.

Among institutions being instructed to adjust salaries are China Investment Corp., the $940 billion sovereign wealth fund, China Development Bank, ICBC, China’s biggest bank, as well as Citic Group, which controls the biggest brokerage, Citic Securities Co., the people said.

The Finance Ministry has devised a formula tied to a number of performance indicators to cut the total amount entities pay to employees, the people said. Those that don’t meet government return expectations would need make deeper cuts to salaries. It would affect employees at all levels to varying degrees, with the firms in charge of devising the cuts to achieve an overall average reduction, they said.

The firms though are being encouraged to continue hiring while keeping the compensation pool unchanged, one of the people said.

The ministry, CIC, Citic Group, and CDB didn’t immediately reply to requests for a comment. ICBC declined to comment.

Unlike some banks in other parts of the world, big Chinese lenders so far have stuck to their dividends plans for the year, with the government keen on maintaining that cash flow amid a tight budget. But speculation has grown that the banks could eventually be forced to lower payouts as their bottom line comes under pressure.

The demands to lower pay could accelerate an exodus of top-level talent in China’s financial industry, where professionals have long groused over low compensation levels compared with global peers. It comes at an opportune time for global giants such as Goldman Sachs Group Inc., who are seeking to hoover up talent as they push into China after the country opened up its financial markets fully to foreign competition this year.

CIC, the world’s second-biggest sovereign wealth fund, is already being hampered by a brain drain, with three of its top executives resigning since April. Managing directors and department heads at CIC typically earn 1 million yuan to 2 million yuan a year depending on performance. While that tops the pay of some government officials, it’s a drop in the bucket versus compensation on Wall Street.

Foreign banks have made a number of recent key profile hires. UBS Group AG snapped up Fan Yang from China Merchants Securities International as chairman of global banking for Asia in April, while Credit Suisse Group AG recently poached rainmaker Wang Jing from China Merchants Bank Co. to develop its wealth management business.

The plan could also spell another blow to bankers working at state-controlled banks in Hong Kong, who were recently told they would need to start paying mainland taxes which can be as high as 45%, compared with the city’s 15% rate.

(Adds details on dividends in ninth paragraph.)

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Braveheart Resources Inc. Closes $101,500 First Tranche from Alumina Financing Facility




Calgary, Alberta–(Newsfile Corp. – August 6, 2020) –  Braveheart Resources Inc. (TSXV: BHT) (OTCQB: RIINF) (“Braveheart” or the “Company“) is pleased to announce that it has closed a first tranche of $101,500 from a financing facility with Alumina Partners (Ontario) Ltd. (“Alumina”) , an affiliate of New York based private equity firm Alumina Partners LLC.

As previously announced on July 15, 2020, the Company has executed an investment agreement with Alumina which provides the Company with an at-will financing facility from which the Company can draw down up to $8.0 million, at its sole discretion, in equity private placement tranches of up to $250,000. Each tranche is composed of units with each unit consisting of one common share and one common share purchase warrant, at discounts between 15 and 25 percent of the closing price of the Company’s shares on the day prior to Braveheart’s drawdown notice to Alumina. The exercise price of the warrants will be at a 25 per cent premium over market at the time of the issuance and the warrants will have a term of 60 months. Each draw down from the facility will be subject to TSX Venture Exchange approval. All securities will be subject to a statutory hold period that expires four months and one day from issuance.

Accordingly, the Company issued 1,000,000 units at $0.1015 per unit. Each warrant is exercisable into a common share at a price of $0.1688 per share for a period of 60 months from the offering. In addition, a further $101,500 in proceeds were raised from certain arm’s length subscribers. No commissions were paid in connection with the offering. The proceeds from the financing will allow the Company to continue with engineering and permitting activities at its 100% owned Bull River Mine project as well as for general working capital.

The Company plans to advance the Bull River Mine project in a phased approach wherein a surface stockpile of mineralized material will provide the initial feedstock to the mill facility. In order to process the surface stockpile the Company needs to complete capital upgrades on surface including the commissioning of a new substation, installation of a flotation circuit, installation of a filtration circuit and civil works associated with the development of a dry stack tailings storage facility (“TSF”). The Company’s internal estimate for capital upgrades is approximately $5,000,000. The Company’s decision to continue with upgrades to the surface infrastructure and process mineralized material on surface is not based on a comprehensive feasibility study of mineral reserves that would otherwise demonstrate economic viability. There is risk and uncertainty regarding the economic viability of the surface stockpile in terms of tonnage, grade, metal recovery and the actual cost to complete the surface upgrades.

Ian Berzins, President and CEO stated “I am extremely pleased that, with the support of Alumina, we were able to begin drawing down on this financing facility. The facility provides the Company with sufficient funds to complete surface upgrades and continue working with regulatory authorities on re-permitting of the Bull River Mine with a planned ultimate restart of mining and milling operations at the mine in the foreseeable future. By drawing down on an as-required basis we avoid large dilutionary raises as we move the project forward. “

About Braveheart Resources Inc.

Braveheart is a Canadian based junior mining company focused on building shareholder value through exploration and development in the favourable and proven mining jurisdictions of the East and West Kootenays of British Columbia. Braveheart’s main asset is the Bull River Mine project which has a current mineral resource containing copper, gold and silver. The property is fully developed with 21,000 metres of underground developments in terms of ramps, raises and drifting on mineralized structures on seven levels. The surface infrastructure includes a 750 tonne per day conventional mill with adjoining crushing facilities as well as offices and mine maintenance facilities. The property is connected to grid power and there is year-round access to the site by paved and all-weather roads.

Contact Information
Braveheart Resources Inc.
Ian Berzins
President & Chief Executive Officer
This email address is being protected from spambots. You need JavaScript enabled to view it.

Caution Regarding Forward-Looking Information

This news release includes certain information that may constitute “forward-looking information” under applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements about strategic plans, future work programs and objectives and expected results from such work programs. Forward-looking information necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; and other risks.

Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information and the risks identified in the Company’s continuous disclosure record. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. All forward-looking information contained in this news release is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this new release.

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