Bitcoin's Case As A Hedge Asset Continues To Grow

[ChiBitCTy]

I've seen the debate whether bitcoin is a hedge or not on here many times.  Investopedia describes a hedge as " A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security".

A hedge doesn't mean that asset can't lose value. Take a look at Gold which no one debates as a hedge asset, it's price/value goes down all the time.  

I found this post from Business Week recently that dives in to this topic a bit I thought I'd share.

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[hatshepsut93]

A hedge is supposed to at least crash less than the asset it works against, and it's supposed to be predictable. Of course, nothing is 100% predictable, but some things are more predictable than others. So, gold is a good hedge, because it never crashed hard during the global market downtrends, and it reacted predictably to them.
But Bitcoin is not guaranteed to show the properties of hedge when the time comes, we all remember how it crashed by 50% together with other markets, then had an unrelated bull run that reclaimed all losses and even made additional gains. Hedges are supposed to reduce risks, Bitcoin increases it compared to any other traditional investment.

[pooya87]

this is really sad because bitcoin is not an asset nor a hedge. it is a currency and even though currencies could also be used as both but the primary identifier remains the same. nowadays i see more and more people refer to bitcoin as an asset which i guess is the result of bitcoin price always rising.

So, gold is a good hedge, because it never crashed hard during the global market downtrends, and it reacted predictably to them.

that's just the market size difference. in a much bigger market with packed orderbooks which is also controlled by centralization and even government it is a lot harder to see huge volatility such as sudden crashes than it is to see the same in a decentralized small market with tiny orderbooks.

[Sanitough]

Bitcoin is a global currency, with adoption it makes the market better and better and though there is a crisis and inflation which is inevitable to a struggling economy but at least bitcoin is based on the global economy. So, if one certain country struggle, the effect would be lesser to the crypto market and that is also depending on how big or small the country is to evaluate the effect, so I believe Bitcoin is a good hedge against a struggling economy.

Imagine, if more people would choose bitcoin as a hedge, the result would be so positive for the crypto market as we will grow while the fiat system will struggle.

[davis196]

this is really sad because bitcoin is not an asset nor a hedge. it is a currency and even though currencies could also be used as both but the primary identifier remains the same. nowadays i see more and more people refer to bitcoin as an asset which i guess is the result of bitcoin price always rising.

So, gold is a good hedge, because it never crashed hard during the global market downtrends, and it reacted predictably to them.

that's just the market size difference. in a much bigger market with packed orderbooks which is also controlled by centralization and even government it is a lot harder to see huge volatility such as sudden crashes than it is to see the same in a decentralized small market with tiny orderbooks.

Every currency is an asset as well.Gold used to be a currency in the previous centuries,now it's an asset only.
Anyway,thinking that an extremely risky asset like Bitcoin can be used as a hedge investment means that the global financial markets are heading towards insanity.
Market supply is more important than the market size,when it comes to price stability.There are rumors that the US federal reserve is manipulating the gold market.Maybe that's why the gold price is so stable.

[mk4]

this is really sad because bitcoin is not an asset nor a hedge. it is a currency and even though currencies could also be used as both but the primary identifier remains the same. nowadays i see more and more people refer to bitcoin as an asset which i guess is the result of bitcoin price always rising.

It's an asset. Though a hedge? It's definitely debatable.

Bitcoin can be used as cash, as currency, as a hedge, as an investment, as a store of value, whatever. The main point is and what's great is, you can use bitcoin for whatever purpose you want!

[hatshepsut93]

this is really sad because bitcoin is not an asset nor a hedge. it is a currency and even though currencies could also be used as both but the primary identifier remains the same. nowadays i see more and more people refer to bitcoin as an asset which i guess is the result of bitcoin price always rising.

Anything can be a hedge as long as it acts as a hedge. And as for asset, it's literally anything precious, so Bitcoin is an asset too.

that's just the market size difference. in a much bigger market with packed orderbooks which is also controlled by centralization and even government it is a lot harder to see huge volatility such as sudden crashes than it is to see the same in a decentralized small market with tiny orderbooks.

Yeah, but investors don't care about this, all they care about is how to make money and how to preserve their gains. Big market, small market, regulated, not regulated, no investor is going to cut Bitcoin some slack just because it's different from other investments.

[pooya87]

Yeah, but investors don't care about this, all they care about is how to make money and how to preserve their gains.

that's a big problem though. soon we could see the majority of people in bitcoin are in it to make a quick profit and because of that they demand more volatility rather than growth because they can make more money that way and before you know it instead of bitcoin being this decentralized currency that people use without any banks,etc. we see them only trading IOUs or get piece of worthless paper instead of bitcoin from a bank. look what they did to gold...

[tyz]

This also includes art of any kind. Prices at auctions have risen sharply again despite Corona, although they had already risen sharply before. Money printing frightens especially the rich and wealthy and they try to protect their money from devaluation. The smart ones invest in Bitcoin (and to a certain degree in gold), the less smart ones meanwhile invest in immovable assets like wiskey or works of art.

[hd49728]

I like bitcoin most because it is decentralized. I can be my own bank and governments can not control my bitcoin or block my bitcoin transactions.

Bitcoin is light than gold bars and I can bring my bitcoin in any of my trips globally. If I don't disclose that I am a bitcoin investors, and have big fund, I don't have to worry about assassination because of wearing gold on my body or bring gold bars around.

[Yaunfitda]

Yeah, but investors don't care about this, all they care about is how to make money and how to preserve their gains.

that's a big problem though. soon we could see the majority of people in bitcoin are in it to make a quick profit and because of that they demand more volatility rather than growth because they can make more money that way and before you know it instead of bitcoin being this decentralized currency that people use without any banks,etc. we see them only trading IOUs or get piece of worthless paper instead of bitcoin from a bank. look what they did to gold...

Isn't it that during 2017 madness, people really think that bitcoin is a get rich scheme until they get REKT when we entered the bear trend? Bitcoin has never been tested though, and the pandemic is really the first big test to conclude that it can be a hedge, unfortunately it is not because of it's volatility. It's more of a speculative asset more than anything else.

[meanwords]

If they are going to use Bitcoin in order to prevent their assets devalue because of a certain currency, then Bitcoin could be consider a hedge too I guess. From what I've seen so far, Bitcoin is being used to flee from a failing economy or currency anyway and so far, it is working. Although Bitcoin is a currency, if people starts using Bitcoin as hedge, then they will inevitably use and understand in time it which is good for Bitcoin in the long run.

[Botnake]

If they are going to use Bitcoin in order to prevent their assets devalue because of a certain currency, then Bitcoin could be consider a hedge too I guess. From what I've seen so far, Bitcoin is being used to flee from a failing economy or currency anyway and so far, it is working. Although Bitcoin is a currency, if people starts using Bitcoin as hedge, then they will inevitably use and understand in time it which is good for Bitcoin in the long run.

That's right, investors hedging their money into bitcoin has to believe that bitcoin is better then their economy and if everyone of us thinking that way, then it's not impossible that bitcoin will be very much benefited as its demand will increase and we know what's going to happen.

Bitcoin could be subject for manipulation by some but if you look at its long term movement, you'll see how stable it is and how strong it is, so I guess being a hedge means better than the other, bitcoin has that qualify now already.

[Lance203sin]

Bitcoin could be a hedge only while eternal growth is working

[Cryptoreflector_666]

I've seen the debate whether bitcoin is a hedge or not on here many times.  Investopedia describes a hedge as " A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security".

A hedge doesn't mean that asset can't lose value. Take a look at Gold which no one debates as a hedge asset, it's price/value goes down all the time.  

I found this post from Business Week recently that dives in to this topic a bit I thought I'd share.

In my opinion, bitcoin can be regarded as a hedging asset, because it is not a cost - supporting element, but on the contrary-its value is supported by Fiat currencies and gold-a currency reserve. Gold, unlike bitcoin, is not considered a hedging asset because it itself creates value and value for other products. When bitcoin itself becomes something that sets the value for something else, then it can be considered from this side ( I mean a hedging asset).

[ChiBitCTy]

this is really sad because bitcoin is not an asset nor a hedge. it is a currency and even though currencies could also be used as both but the primary identifier remains the same. nowadays i see more and more people refer to bitcoin as an asset which i guess is the result of bitcoin price always rising.

So, gold is a good hedge, because it never crashed hard during the global market downtrends, and it reacted predictably to them.

that's just the market size difference. in a much bigger market with packed orderbooks which is also controlled by centralization and even government it is a lot harder to see huge volatility such as sudden crashes than it is to see the same in a decentralized small market with tiny orderbooks.

I'm not saying bitcoin isn't a currency.  Bitcoin is first and foremost a currency.  That is one thing that I express often and to anyone who's new to bitcoin or when I'm explaining bitcoin to someone, I always reinforce the fact that bitcoin is digital currency.  However that doesn't make bitcoin not an asset or a hedge.  The US dollar is both an asset and a hedge.  It's traded in markets daily etc..just like bitcoin.  Just because it's price continues to rise, does not mean that's what makes it an asset.  An asset is anything with value technically.

[carter34]

However that doesn't make bitcoin not an asset or a hedge.  The US dollar is both an asset and a hedge.  It's traded in markets daily etc..just like bitcoin.  Just because it's price continues to rise, does not mean that's what makes it an asset.  An asset is anything with value technically.

No doubt with this, I agree your statement. I will say bitcoin is an asset because you can invest in it and profit or have lose but one good thing about investing in bitcoin more than altcoins is that even at loses, you can recover by hodling, it can take time but you can get some amount back when price increase.

[Fundamentals Of]

this is really sad because bitcoin is not an asset nor a hedge. it is a currency and even though currencies could also be used as both but the primary identifier remains the same. nowadays i see more and more people refer to bitcoin as an asset which i guess is the result of bitcoin price always rising.

So, gold is a good hedge, because it never crashed hard during the global market downtrends, and it reacted predictably to them.

that's just the market size difference. in a much bigger market with packed orderbooks which is also controlled by centralization and even government it is a lot harder to see huge volatility such as sudden crashes than it is to see the same in a decentralized small market with tiny orderbooks.

I'm not saying bitcoin isn't a currency.  Bitcoin is first and foremost a currency.  That is one thing that I express often and to anyone who's new to bitcoin or when I'm explaining bitcoin to someone, I always reinforce the fact that bitcoin is digital currency.  However that doesn't make bitcoin not an asset or a hedge.  The US dollar is both an asset and a hedge.  It's traded in markets daily etc..just like bitcoin.  Just because it's price continues to rise, does not mean that's what makes it an asset.  An asset is anything with value technically.

The rising price is not solely the reason why Bitcoin is an asset. But that is probably the main reason why Bitcoin has been treated more as an asset than just a currency. That is where it differs a lot from the USD and other strong currencies which are also being treated as both assets and hedges.

The rising price of Bitcoin is so vital in the way people perceive it that Bitcoin is now secondarily a currency and primarily an asset.

[wack slacker]

Since 2017 there have been many institutional investors paying attention to bitcoin and cryptocurrencies, there are many organizations that have lost money and some that have won, but with technical analysts, now bitcoin has achieved get the potential price, suitable for buying.

[20kevin20]

This debate will never finish unless markets grow up and mature. Bitcoin is what we decide it to be, and tbat can only happen with time. To me, it does represent a refuge from the soon-to-be crashing financial system. Whether others do or do not believe the same is up to their own.

Give it time, God damn it. It'll show its true form within years, possibly decades. Today we aren't even sure if it's going to be legally accepted everywhere within a matter of years or other countries will start banning it. We don't even have the legal framework in some countries to begin with. It just needs time.