The U.S.-China trade war, the Hong Kong protests, and now the attack on Saudi Arabian oil producer Aramco – these events add more pressure to financial and commodity markets that already look overextended; stocks are trading close to all-time highs. On top of that, central banks are slashing interest rates and printing money while the real-estate market is still overpriced.
If you’re an everyday investor, it appears that your options to protect your wealth are becoming limited. The good news is that there’s an asset that you can use as a hedge. Best of all, this asset is not correlated with other traditional markets.
The value of stocks, bonds, and other asset classes is tied to factors such as GDP, earnings, and interest rates. Bitcoin, on the other hand, appears to be dancing to its own tune. Bitcoin is dubbed by many as the “new gold.” However, the dominant cryptocurrency is not correlated with any asset, especially gold.
Therefore, these findings suggest that bitcoin appears to be an ideal hedge – especially in a global environment that’s charged with geopolitical risks. The stock market, the U.S. dollar, gold, and oil may go up or down and bitcoin would still continue appreciating considering that it is in a bull market.
With instabilities gripping various countries, many are already looking at bitcoin to protect their wealth. Clem Chambers, CEO of ADVFN and Online Blockchain plc, spoke exclusively to CCN.
"Bitcoin is the new gold and as such it is used as ‘flight capital’- an asset which can be moved and stashed in times of trouble. These days there aren’t many objects you can use for this purpose; gold, for example, being difficult to buy, secure and move."
The difficulties that gold presents as a store of value may be the reason why it is uncorrelated with bitcoin.