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Bitcoin as a Hedge Narrative Rising as Fears for Fiat Heightened

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It is unsurprising that Bitcoin came into existence at a time when the traditional markets and economies, as well as banks, had failed the planet. Satoshi Nakamoto saw the need for something for people to take a personal hedge against poor monetary policy and the de-valuement of their money. 

Some 12 years on from the 2008 financial crisis and the globe is facing a repeat of what happened after the housing collapse following the Covid-19 pandemic. The reaction to try and salvage the economy is to stimulate the economy and spending by flooding the world with printed cash with little care of the potential dangers. 

The difference this time around is, after the creation of Bitcoin, it is now in the mainstream light and is showing that it could well be a hedge against hyperinflation and the other danger of the current monetary policies being seen across the world. Bitcoin has piqued institutional trading interest and its role as an alternative financial system may actually be playing the part of a hedge against the collapse of the value of fiat. 

A safe haven for investors

The idea of Bitcoin being a safe haven bet for investors is not entirely a new concept, but the narrative is now growing from the other end of the candle as the fiat side of the economy is in danger, and a hedge is needed. 

 A recent paper titled Can Cryptocurrencies be a future Safe Haven for Investors? A Case Study of Bitcoin suggested that “Bitcoin may offer some hedging to diversification potential in the global portfolio investments.”

The research paper examined the relationship between Bitcoin, global economic activity, equity markets, and foreign exchange markets, while also exploring the potential for Bitcoin to act as a safe haven. Besides, the model consisted of five variables: BTC Prices, Baltic Dry Index [BDI], Dow Jones Industrial Averages [DJIA] Index, USD‐Euro exchange rate, and USD‐Yen exchange rate.

The paper’s findings concluded,

“Bitcoin behaves differently to the DUSD‐Euro and USD‐Yen exchange rate vis‐à‐vis its relationship to the BDI and the DJIA. It was found that Bitcoin does not exhibit any significant relationship with economic activity [BDI], equity markets [DJIA], or the foreign exchange [USD‐Euro, DUSD Yen] markets in either bullish or bearish regimes.”

Big names looking at Bitcoin

The Founder and CEO of Tudor Investment Corporation, Paul Tudor, recently revealed that he is buying Bitcoin Futures. In a letter to his clients, he said he opted for Bitcoin against the inflation that he predicted coming from the central bank money-printing.

“We are witnessing the Great Monetary Inflation — an unprecedented expansion of every form of money unlike anything the developed world has ever seen. The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be Bitcoin.”

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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