Quite a few people don’t hold too much hope for Bitcoin as an investment profit opportunity and instead see it more as a hedge against an impending market crash. They see it as a diversification of their portfolio should the world’s economies take a tumble. A reasonable thought, given that many experts (even crypto doom doctor Nouriel Roubini) says that a recession may occur in the next few years.
Bitcoin is kind of expensive to get into right now but what’s good is that you can enter even with a few hundred bucks and still come off much better. Many people recommend budgeting about 5 - 10% of investments for Bitcoin into the overall investment portfolio and that alone is enough for a solid hedge against a market crash.
But could it be a hedge against a market crash is the question. It is definitely beating the stock market on gains, something popular crypto insider Anthony Pompliano likes to emphasize on Twitter. There has been a recent downtrend in the world’s stock markets and reports have been released saying that a recession may very well occur in the next 5 or so years. The trade war between the US and China speaks to the volatility of the global economy and Russia’s state news channel RT said that the Chinese could abandon the yuan in favour of Bitcoin should the value of the former fall.
Grayscale Report on Bitcoin Hedging
That’s a bit of speculation, but the sentiment definitely exists. Grayscale investments, a digital assets management group, released a report called “Hedging global liquidity risk with Bitcoin” in June 2019 where they argued that Bitcoin and its properties would help investors during times of market disruption.
The S&P 500 has performed rather well since the recession of 2008 actually, but critics have pointed to several macroeconomic factors as being factors in an economic downturn - Brexit, Trump decisions, trade wars etc. Debt is also a deadly and silent symptom in the world. America’s debt is phenomenal and I think the total world debt is over $250 trillion.
Against all this though, we have a solid store of value which functions in the same way as regular money and is giving way to new economic models: Bitcoin and cryptocurrencies. Bitcoin can has already showed its potential in economically affected countries like Venezuela and Argentina - so why couldn’t it be used if the world’s economy collapses?
In any case, it can’t hurt to invest just a small amount in Bitcoin and maybe some other major cryptos. With dollar cost averaging, you can really keep the losses at a minimum, if any. It’s just a precaution just in case something does happen with traditional assets.