GBTC - Bitcoin: A Unique Risk-Off Asset?
2024-04-23 13:15:00 ET
Summary
- Because of the 2008 Global Financial Crisis, trust in governments and financial institutions has waned.
- While traditional risk-off assets are likely to play a role in portfolio construction, their limitations are giving investors reason to reassess so-called risk-off assets.
- Bitcoin offers an interesting paradox: enabled by its groundbreaking technological underpinnings, it can act as an effective hedge against economic uncertainty, potentially resulting in exponential growth.
By Yassine Elmandjra, Director of Digital Assets
Because of the 2008 Global Financial Crisis, trust in governments and financial institutions has waned. Since then, events like the European Sovereign Debt Crisis, the U.S. Federal Reserve’s response to COVID19, and the collapse of major US regional banks have exposed the pitfalls of relying on centrally controlled institutions.
Along with the accelerated impact of technological innovation, this deterioration in trust has called into question the effectiveness of traditional risk-off assets in protecting modern portfolios. Are government bonds less risky in the wake of events like the European Sovereign Debt Crisis? Is physical gold less effective as a hedge in a digital economy? Will inconsistent Fed policies threaten the dollar’s role as a reserve currency? While traditional risk-off assets are likely to play a role in portfolio construction, their limitations are giving investors reason to reassess so-called risk-off assets....
Bitcoin: A Unique Risk-Off Asset?