Categories: Bitcoin Business

The Bitcoin Skeptic: Bitcoin Isn’t a Hedge for Anything

Click here to view original web page at www.ccn.com
Bitcoin is not a hedge for anything because its volatility actually adds risk to every single scenario a portfolio manager can create. | Source: Shutterstock

By CCN Markets: As the bitcoin skeptic here at CCN, my job is to provide counter-arguments to the bitcoin bulls.

Today I’m going to debunk the claim that bitcoin is a hedge against anything, much less the stock market.

A “hedge” is an investment made to offset some form of risk. It can take many forms.

An investor may purchase put options on the stock market that will increase in value if the stock market falls. Perhaps a company will open a factory overseas that it exports products to in order to hedge against currency risk.

So the key to a hedge is that it, as an investment, offsets risk in another investment.

Risk is measured by volatility. The higher the volatility of a security, the riskier it is.

To provide a baseline, the five-year standard deviation for the S&P 500 is 12. That means the S&P has a 95% likelihood of moving in a range of -24% to +24% in any given year.

Now let’s look at one of most volatile securities there is in the securities markets: crude oil. The five-year standard deviation for the United States Oil Fund ETF is 28.

Now let’s look at a 3x leveraged oil fund ETF, one designed to provide triple the returns of crude oil. The five-year standard deviation for the ProShares Ultra Bloomberg Crude Oil ETF is 54.

The five-year standard deviation for the Grayscale Bitcoin Trust ETF is 85. That means the average annual return of this ETF could swing 170 percent in either direction in any given year. That means, yes, it could go to zero.

That’s right. Bitcoin is 60 percent more volatile than even a 3x leveraged version of the most volatile security out there.

So how on earth could it be a hedge against anything?

“Bitcoin is literally the riskiest tradeable asset right now, and I wouldn’t even call it an asset. It is literally backed by nothing and based entirely on speculation. That’s why it is so volatile. It's a sucker's bet, not a hedge”

Butowsky also points out that no other chart of any security anywhere correlates, either positively or negatively, to any other asset. Any expert who says otherwise is "dead wrong" – like this guy:

For those who say that makes it a perfect non-correlated asset to the stock market, the idea of a hedge is – once again – to offset risk.

Lawrence Meyers has published over 2,500 articles on finance and policy at outlets including Breitbart.com, Investorplace, WyattResearch, LearnBonds, Lifezette.com, TownHall.com, U.S. News & World Report, and The New York Observer. He hails from New York City in the USA.

cinerama

Illuminati, Mason, Anonymous I'll never tell. I can tell you this, global power is shifting and those who have the new intelligence are working to acquire this new force. You matter naught except to yourself, therefore prepare for the least expected and make your place in the new world order.

Disqus Comments Loading...
Share
Published by
cinerama

Recent Posts

Wealth manager launches world-first bitcoin yield fund

A US-based wealth manager has claimed an industry milestone with the launch of the first cryptocurrency derivatives-based yield fund on… Read More

5 hours ago

CME Group To Launch Bitcoin Options In Early 2020, Cites Client Demand

CME Group Inc (NASDAQ: CME ) announced Friday that it will launch options on its Bitcoin futures contracts in the… Read More

5 hours ago

Nigerian Rocks Crypto World By Returning NGN 28.8 Mn Worth Of Bitcoin That Was Sent To Him In Error

Here’s the latest on today’s edition of “Wait, What?!”; A Nigerian man woke up one day to find that NGN… Read More

5 hours ago

Bakkt: A Big Boost For Bitcoin (BTC) or Will It Flop?

Share Tweet Send Share The launch of the largest institutional bitcoin product of the year is finally upon us. Can… Read More

5 hours ago

Bitcoin (BTC) Metrics Pointing to Bullish Returns

Share Tweet Send Share Many analysts over the years have said that bitcoin is a speculative bubble, comparing it to… Read More

5 hours ago

Bitcoin Sheds $10,000 Support Again Ahead of Bakkt Launch

Ahead of the launch of Bakkt’s Bitcoin (BTC) futures, bears have continued to assert control over the cryptocurrency market. Ouch.As… Read More

11 hours ago

This website uses cookies. We use these cookies to collect data about your interaction with our website for the purpose of continuously improving your experience with our site. For more information we encourage you to read our privacy policy.

Read More