Topic: Is Bitcoin going to be the best hedge in the upcoming financial crisis? - page 2. (Read 715 times)

When the crisis occurs. almost all commodities experience weakening. which is why many people go bankrupt during a crisis and crypto too. especially crypto including a very sensitive and volatile market. of course the economic crisis will greatly give bad affect to the market

Well not sure if you meant that it's actually higher or lower but if you look at thing like Chapwood Index, Big Mac index or M1 Money supply with data provided by FED (https://fred.stlouisfed.org/series/M1) you will quickly realize it's at least 7%.

I agree with the argument that the metals will probably never go to zero but at the same time I strongly believe that it's days as future go-to store of value are numbered because of its limited portability.

To be honest I'm also hedging with Bitcoin (BTC) but I was hoping somebody will come with some solid argument that the US treasuries, Gold or something I have never heard of will be the winner and support it by some solid reasoning.

That didn't happen [yet] but thank you for sharing your thought.

Yeah, inflation does depend on those things.  In the US where I live, and for the things I buy, inflation is nowhere near 7-10%.  Inflation hits some goods & services more so than others, and the data the US government gives is based on a "basket of goods" if I'm not mistaken, and it certainly doesn't measure everything that's bought or sold.

Anyway, if your investment doesn't at least keep up with inflation then you're obviously losing money.  One of the facts that precious metals hucksters keep repeating over and over is that a silver quarter can still buy a gallon of gas and therefore silver is the best hedge against inflation.  Do I believe that?  Absolutely not, though I don't think it's a horrible idea to buy some metals right now.  They've taken a serious beating since 2011 and may go up again if any sort of crisis hits.

Bitcoin, though?  Come on, I couldn't think of a worse inflation hedge, even at the price it's selling for right now.  Why?  Because any safe-haven, inflation-hedging asset should not be as volatile and prone to bubbles and crashes like bitcoin is.  It may be an excellent way for a trader to make money from, assuming that the price appreciates in the long- or short-term, but there's no way I'd feel safe using it as a hedge.  It's around $3400 as I write this, and it could drop to $1000 by tomorrow morning for all I know.  There's too much uncertainty and too much volatility, and traditional inflation hedges lack those two features. 

Even though I don't buy into the propaganda the gold & silver permabulls keep promulgating, I agree with their point that neither metal is going to drop to zero, since both have actual real-world uses.  Bitcoin probably won't drop to zero, but there's more of a chance of it doing so than metals--or even stocks with solid companies behind them for that matter. 

I'm hoping that this discussion turns out to be pointless and that we're not staring down a global economic crisis, but I do feel the bad vibes that are going around and I do get the feeling that something bad is going to happen.  I can already see some of it in the stock market, though I've been expecting a major correction for quite some time now.  For bitcoin, I'm hoping 2019 turns out to be a better year than this one.

You are asking for input that no one here can provide. It's all up to you to take that risk, because even if we all largely agree that x asset will be doing fine during difficult times, it may still dump just as hard as the rest of the assets.

It wouldn't surprise me if we end up going through a time where assets dumps simultaneously and there is no safe haven at all. There is not much you can do to weapon yourself against that.

My personal hedge is strictly Bitcoin. I accept it completely if it ends up doing the opposite of what I expect it to do during difficult economic times. Maybe that real estate can be added to that later on, but who knows.

It is a good theory that bitcoin as a digital form of gold would be used to hedge against the impending financial doom, but bitcoin seems to follow the same patterns as regular trading markets, so if those fall then bitcoin is also likely to fall

That's not true - if you look at the graphs Gold was 1 month in red but then it run like crazy.

Just to clarify - I'm not looking for an instrument that will 100 % shield me from any loss period I'm looking at something that will not stay ridiculously low for say more than 3 months when there is blood in the streets.

You can always play the short side. I've been itching for many years to trade the ultrashort S&P 500 ETF and other similar instruments, but I'm patient enough to wait for a real bear market. I've watched too many short traders get slaughtered over the past several years to fade the stock market myself. It's the same as watching Bitcoin bears during bubbles.

I just wonder how long it'll take me to recognize it, and how much that'll cost me. Most people won't see a real crisis coming. That's why I don't expect one now. Everyone is ready for blood.

I don't understand why everybody thinks there is going to be a recession just because the stock market has fallen close to the yearly open.

The economy is not in bad shape and the reason why the stock market has fallen so much is due to the FANG stocks which were over-valued to begin with. Every Tom, Dick and Harry was buying AAPL and Facebook they assumed it would keep going up forever and little did they realize that it was way over-valued as it was. No different than the Crypto bubble at the beginning of the year.

I believe that people do consider it to be a good hedge, let's take the example of the Asian country India. Two years ago there was demonitisation in their country, and suddenly everyone bought bitcoins to hedge their looses and it's pertinent to note that bitcoins began to sell at a premium there. I believe bitcoins has become popular all over the globe, and gold shine has worn off as it's illiquid at times, hence I believe bitcoins can be used to hedge against the finicial crisis if it happens.

When a huge global financial crisis happens it just happens to everyone, there is absolutely no way of running from it.

Stocks will fall, crypto will fall, gold will fall, house value will fall. There will be nothing that will profit you at the time of an economical crisis, you will lose money no matter what you are invested into. There is no running away from this at all. Hence there is absolutely no way of profiting neither.

In the end crypto is used to the volatile world whereas other methods take years to recover so the best move you can make is stay on crypto and take the hit and just hope that you will win the recovering race compared to other investment methods.

I still prefer diversification and putting my money into multiple stuff but in the end none of that matters during a huge global crisis.

That's very fair point - we never had global financial crisis and Bitcoin, hence it's in the speculation section.

This is what I've been thinking recently. We've never had Bitcoin in a financial crisis, companies dealing in Bitcoin still file for bankruptcy like all other companies. I think at some point we might end up with a gold/stocks sort of system when things are considered too huge to fail and then artificially proped up by a government somewhere.

Gold doesn't have inflation but when it leaves the vaults, it's inflated because its owner is no longer hodling if in its value and it becomes available to the open market. The same can happen to Bitcoin.

Bitcoin has existed only during a time when the overall markets were very bullish. Real estate, stocks, gold, and others have been in raging bull market ever since the recovery from the 2008 crash.

That's why I think it's dangerous to assume Bitcoin won't be affected by global market trends or financial crises. It's never experienced a major global downturn before.

I think it can be said like that because the price of bitcoin from 2009 to 2018 has a very sharp decline even exceeding the crisis in 2013.

You're right, actually in September 2008 even the gold was down for a month and a bit and then it went on one hell of a rally. With that in mind I just changed the subject of the topic from "Is Bitcoin the ultimate hedge against the upcoming financial crisis" to "Is Bitcoin going to be the best hedge in the upcoming financial crisis?"

My point is - after the dust settles in something like late 2020 or early 2021, are we going to see Bitcoin thrive (price wise, adoption wise) or is it going to two digits and on verge of being almost forgotten?

The next Bitcoin halving will be on circa 26 May 2020 - probably right in the middle of the financial crisis - this should affect things. If I remember correctly last buildup started in fall of 2015 when we went to bottom of about $180 and then 9 months later it was already on the run and if it wasn't for the Bitfinex hack probably by end of summer 2016 we would have had $1000; instead we had to wait for it till January of 2017.

If history tends to repeat itself the next buildup will start in fall of 2019 if not earlier however the crisis might intervene with this...

I agree with the first part of what Tytanowy Janusz said, during crises people are known to stay away from higher risk assets and bitcoin being volatile doesn't help that either so it surely is not the "ultimate hedge" against the financial crisis.

but bitcoin being what it is, has always been acting separate from any other market. for example when other markets are falling bitcoin has been rising in the past or vice versa. it always moves on its own and on top of  that being a global asset it doesn't take effects from local incidents that much.
so in my opinion in case of a financial crisis bitcoin would either not be affected at all or rise at least a little.

That is what many speculators are saying and the financial crisis has started.  I will keep holding the little I have and to trade them in future.  Remember that blockchain technology is transparent, decentralized and it is not control by any governments or financial institutions therefore it will be the best hedge for dollar and other currency.

People always seem to only think how a financial disaster will affect Bitcoin, but they forget that Bitcoin itself is hugely volatile, and it won't stop being volatile during any dramatic events in economy. So, you might try to use it as a hedge and then encounter some uneplainable price moves like a 20% crash or pump in a matter of hours. This unpredictability can make it a very poor hedge - people who are scared to lose 30% of their value in the long run might lose some 10% in one moment if they panic sell.

there is no ultimate hedge. in a serious market contraction, everything will crash. on top of that, debt monetization has pumped all markets---even gold and bitcoin have benefited from it.

a global crash definitely means a risk-off investment cycle. this early in its life, bitcoin is still considered a high-risk/high-reward investment, so money would likely flow out of the bitcoin markets and into safer havens.