Is Bitcoin a Good Hedge Against the U.S. Dollar?
One of the reasons investors have put money into Bitcoin (CRYPTO: BTC) is the belief that it can be a possible hedge against the U.S. dollar. Fluctuating currency valuations can add risk for investors and hedging against that can help reduce a portfolio's overall volatility. But just how effective is Bitcoin in doing that?
When there's currency-related risk or risk in general, investors often go to safe-haven investments, including gold, to help offset the uncertainty. Bitcoin has at times been referred to as "digital gold," as another potential store of value and way for investors to diversify their holdings. While it's a lot more volatile than gold, it could have a similar purpose for investors, to hedge against uncertainty.
A way to gauge this effectiveness is by comparing Bitcoin to the Invesco DB US Dollar Index Bullish Fund, which helps to track how the U.S. dollar is doing against six major currencies: the euro, the British pound, the Canadian dollar, the Japanese yen, the Swiss franc, and the Swedish krona. When compared to the fund, Bitcoin does appear to have an inverse correlation.
Source Fool.com
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