BitMEX research tries to revert question of “When is the next global financial crisis going to happen?” In this report, BitMEX argues that the focus of financial risk has shifted from banks to asset management industry; and a “repeat of 2008” that is retail banking deposits and payment systems being under threat is unlikely. The fragility is rather most significant in corporate debt investment funds and unconventional debt investment vehicles.
It endeavors the issue of Bitcoin and crypto enthusiasts and investors asking about the next crisis that is driven with the assumption that it will occur every decade or so, will have a positive impact on Bitcoin price and will result in questioning the integrity of banking and electronic payment systems. For Bitcoin price, it argues, if Bitcoin “does respond well in the next crisis that will be a huge positive for Bitcoin and the store of the value investment thesis.”
Bank Balance Sheets in Developed Markets Are Lively
Bank management and regulators have driven in the shadows of 2008 and as a result, bank balance sheets and capital ratios have significantly strengthened. The focus shifts to main western banks that have not expanded their balance sheets at all since the global financial crisis, Over the last decade.
Rise in Leverage in the Asset Management Industry
The data show that, unlike the banking sector, the asset management industry broadened considerably since 2008 meanwhile, leverage also appears to have increased.
New Corporate Debt Market Vehicles
The replacement of the role of the banks in the corporate debt markets has resulted in the rapid growth of interrelated, non-mutually exclusive investment structures. The non-bank mechanisms for providing corporate with financing viz. Collateralize Loan Obligations (CLOs), Leveraged Loans, Private debt deals, and Bond fund ETFs and mutual funds eventually increased.
Corporate Debt Markets Status
Corporate debt levels have rose since 2008, with gross debt of Russell 3000 companies sums up to US$11 trillion, compared to just over US$8 trillion at the time of the last crisis. Corporations have favored from the new investment products and low-interest rates to lift money at record levels.
A Portfolio with a “Lesser Extent” of Bitcoin
Banks are vital to the financial system and society than asset managers, mentions the report and if asset managers come under pressure, retail and corporate deposits should be safe. Meaning the coming crisis could be less intense than in 2008. However, the “potential for government intervention to mitigate the impacts of the crisis may be more limited than in 2008.”
The data does not seem to be righteous on the precipice of a major crisis, states BitMEX Research, “it could be several years away.” It concludes with the advice to adjust a portfolio with long-dated corporate bond ETF, hedge funds specializing in volatility, VIX calls, gold, and “maybe to a lesser extent, even Bitcoin.”
Wish you all the best,