Can cryptocurrency act as a hedge in a portfolio like gold?

Discussion in 'Stock Market Today' started by Pumpkin_Hat, Aug 18, 2021.

  1. Pumpkin_Hat

    Pumpkin_Hat New Member

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    Some of my fellas tried to convince me to invest in cryptocurrencies to either hedge or speculate while I heard that cryptocurrencies are too volatile to be compared to gold as the way of the hedge. Any opinions would be helpful! Thanks!
     
  2. StockJock-e

    StockJock-e Brew Master
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    Its not gold.

    Bitcoin in particular is pitched as a hedge against inflation, but it really depends on where you buy and how much you love volatility.

    You could have bought recently at $64,000, only to see it drop to $29,000. Did that hedge you? Are feeling protected from inflation?

    On the other side of that argument, if you buy it at the panic lows and simply hold, historically you should be ok, but that is dependent on you not freaking out and selling if you wake up to find yourself down -50%.

    At the moment cryptos are more aligned with stock market movements and do not act like a hedge. There may come a time when crypto disconnects from equity movements and truly becomes a hedge, but we are not there yet.
     
  3. ddebrazza

    ddebrazza Active Member

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    Absolutely not.

    Crypto is even more volatile than the stock market and if the market crashes, so will crypto. Crypto has no real value and is not a functional mineral/ resource like Gold and Silver.

    Gold, Silver, and other minerals have been used, traded, and held for value since the beginning of time and the value has continued to rise.

    If you looking for a way to hedge your stock portfolio, I would suggest one of those Real Estate apps (Like DiversyFund) that let you buy into rental properties. Works the same way as Robinhood except instead of buying stock, you buy real estate.
     
  4. Onepoint272

    Onepoint272 2019 Stockaholics Contest Winner

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    I'm trying to learn as fast as I can. Crypto appears to be a complete paradigm shift, an asset class like the world has never before seen, volatile now but likely an opportunity of a lifetime. It solves a lot of problems with international trade, mobility, and preservation of wealth and is being adopted at a phenomenal rate. That ship has sailed.

    Fiat worldwide is being debased. In the U.S. people get around it by investing in an S&P index fund and think they are getting rich but standing still or falling behind. In the un-banked parts of the world, you can work your whole life and the day after you lose your job, your family begins to starve; there is no mechanism for storing wealth, your hard work, save precious metals but cryptos are quickly winning there; they're more secure, you can carry your wealth as a pass phrase in your head when you cross borders, and you don't get clubbed in the head by someone wanting your gold. They are de-centralized, no more bankster middlemen and it will never go away unless they shut down every computer for ever.

    I'm not there yet, but getting there. Those ahead of the curve are storing wealth in cryptos that are paying great rates of interest and borrowing depreciating doll hairs against it, at very low rates, for their living expenses. I'm not ruling it out as a hedge.
     
    #4 Onepoint272, Aug 21, 2021
    Last edited: Aug 21, 2021
  5. ddebrazza

    ddebrazza Active Member

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    Agreed. While I am bullish on some crypto projects, I believe majority of them are fads that will fizzle out as government regulation catches up and as consumers also become more educated and begin understanding what these things are and how they work.

    I dont know how I feel about needing both a phone, electricity, and internet connection in order to access your money. I am a person who would like to be LESS-connected to the grid, not 100% reliant on it. I am sure someone will come along and explain that how if you have your wallet address or whatever that you could still complete transactions but idk, seems clunky.

    It also makes me uneasy that this is a completely "faith,"-based asset backed by nothing and not tangible like Gold or Silver.

    I really do not like how we as a society are becoming more and more reliant on our phones and our privacy is being chipped away at year-by-year. Seems like everything you do online now requires and is tied to your phone number aka YOU.

    If the market crashes. Crypto will crash. At least now and for the foreseeable future.
     
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  6. Onepoint272

    Onepoint272 2019 Stockaholics Contest Winner

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    Yep, sounds like we are about in the same place.
    • The reliance on technology and technology companies to access my wealth is concerning.
    • The surveillance state facilitated by that technology is disturbing.
    • Seems more practical to carry whole atoms of gold or silver instead of a complicated intelligent arrangement of electrons.
    On the faith-based issue, I guess all money is faith-based, recognized by all market participants to have value, e.g., sea shells, tally sticks, presidents on paper, gold and silver, intelligent electrons. Of these, I agree, the precious metals have the best and by far the longest track record.

    Also, I have a feeling most of these cryptos will go the way of baseball cards and beanie babies. Great to trade now but not a good place to preserve wealth. But if you had to choose one or two cryptos, obviously you'd want to choose the ones that will survive the fad and future regulation and taxation. I'm assuming that would be bitcoin. However, the day the gubermint figures out how to extract their pound of flesh, the bitcoin market will crash and the others will follow. And I think that will have to happen, a free society cannot survive billionaires passing all the wealth they control on to their future generations. I'm a firm believer in the death tax for the very wealthy.
     
  7. StockJock-e

    StockJock-e Brew Master
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    Much like the dot com mania, plenty of crypto names will vanish in the coming years, but the biggest and most promising will thrive.

    Pets.com anybody?
     

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