Bitcoin becomes the institutional favorite as a hedge against financial inflation | Fintech zoom
Bitcoin has had a great run in recent years. From being generally known as an insurgent knowledge to gaining a prominent place in the portfolio of many institutional buyers, the world’s oldest and largest cryptocurrency has spawned quite a few narratives. While it does, however, have an extended method to go before being considered a true ‘safe haven’, one narrative that is still being worried is that Bitcoin is a possible hedge.
At the time of writing, Bitcoin was priced at $ 9,419, with a 24-hour buy and sell amount of $ 21.1 billion.
The prominence of Bitcoin has also been famous for academics. A current document titled Can cryptocurrencies be a safe haven for buyers in the future? A Bitcoin Case Exam He recommended that “Bitcoin may offer some hedge to the potential for diversification in global portfolio investments.”
The analysis paper examined the connection between Bitcoin, international financial exercise, equity markets, and international currency markets, while further exploring the potential for Bitcoin to behave as a protected haven. In addition, the model consisted of 5 variables: BTC Costs, Baltic Dry Index [BDI], Dow Jones Industrial Averages [DJIA] Index, USD-Euro exchange price and USD-Yen exchange price.
The document’s findings concluded,
“Bitcoin behaves differently than the DUSD-Euro and DUSD-Yen exchange rates with respect to its relationship to the BDI and the DJIA. Bitcoin was found to exhibit no significant relationship with economic activity. [BDI], stock markets [DJIA], or foreign currency [USD‐Euro, DUSD Yen] markets in bullish or bearish regimes “.
It was further observed that Bitcoin largely tends to remain in a bullish part with a considerably low probability of transition to a bearish pattern. However, this was not the case when the USD-Euro and USD-Yen exchange charges were checked that they were found to continually switch from one regime to another, while having greater chances of transition.
Whether Bitcoin is a possible hedge or not has been a highly appreciated argument, particularly at a time when the COVID-19 pandemic is at its peak. While not entirely successful, Bitcoin’s gradual rise as well as the provision of minimizing risk, even when the standard market failed, is obvious, highlighting the fact that it can certainly be used as a potential hedging instrument at times. of overwhelming threat.
This has also been confirmed by the appreciable inflow of institutional capital to the BTC market, at a time when the global financial system is in an extremely susceptible state. As previously reported, open curiosity for contractual Bitcoin futures on the CME derivatives market also rose to its highest level.
Even Tudor Funding Company founder and CEO Paul Tudor revealed not long ago that he is buying Bitcoin futures. In a letter to his buyers, he mentioned that he opted for Bitcoin in opposition to the inflation he predicted coming from central bank money printing.
“We are witnessing the Great Monetary Inflation, an unprecedented expansion of all forms of money that is unlike anything the developed world has seen. The best strategy to maximize profits is to have the fastest horse. If I am forced to forecast, I bet it will be Bitcoin. “