Is Bitcoin a Hedge Against Traditional Assets?
One of the important selling points of Bitcoin is that it is an inflation hedge, suggesting that its value will remain stable over time. One explanation is that the cryptocurrency’s supply is limited to 21 million units, resulting in scarcity as demand grows.
Bitcoin a Safe Haven or Hedging Asset?
Practitioners, academics, regulators, and the media are all paying more attention to Bitcoin. Bitcoin, for example, came in second on Google Trends’ list of the year’s most popular search terms. Recent regulatory regulations for Bitcoin have been issued by the European Union, India, and Japan, indicating that government authorities are paying closer attention to Bitcoin’s role in the financial system and its interactions with other asset markets.
It has been discovered that BTC may be hedged against stocks and bonds, and that it is a haven when the monetary market experiences dramatic price movements. Investors and portfolio risk managers who have invested in or hedged using BTC will find our findings useful.
Cryptocurrency and BlockChain
Blockchain allows Bitcoin and other cryptocurrencies to function without a central authority by dispersing their functions over a network of computers. This lowers risk and removes a lot of the transaction and processing fees.
As bitcoin fell below $30,000 in May, several investors said that the world’s largest cryptocurrency doesn’t look to be a hedge against more traditional assets, citing a temporary link with the stock market.
Is BTC expected to continue rising?
BTC is now correlated with stocks but its 10x up in 2 years. Despite the challenges of forecasting the price of a fluctuating cryptocurrency, the experts we ’ve interviewed all agreed that ETH might cross the $4,000 barrier again in 2022. And, according to BBC espionage expert Mike McGlone, Ethereum will end the year between $4,000 and $4500.
Conclusion
Is Bitcoin actually an inflation hedge? Yes, Despite its limited supply and the famous “store of value” idea, Bitcoin continues to trade with high volatility and a closer correlation to risky assets such as equities than traditional safe havens such as gold. However, it is not inflation that is driving this price movement.
This article was written by Quratulain Zaheer.
