Renowned Finance Author Reveals Why Bitcoin Is A Poor Hedge Against Market Crash

Lebanese-American finance author, Nassim Nicholas Taheb has declared that Bitcoin (BTC), the world’s largest cryptocurrency, is a poor hedge against market crash. The author has publicly disputed other analysts’ perspectives of Bitcoin as a hedge and store of value, highlighting its speculative nature and price instability.

Bitcoin’s Limitations As A Hedge Against Market Crash

In a heated debate on CBNC’s Squawk Box, Taleb discussed the role of Bitcoin modern finance, highlighting that its touted role as a hedge against inflation or market crash have been overstated. Known for his criticism against BTC and a general dislike for the crypto industry, Taleb argues that Bitcoin is an extremely speculative and volatile asset.

He disclosed that the cryptocurrency’s speculative nature undermines its potential to be a reliable store of value during periods of economic turmoil. Taleb has based his criticism on Bitcoin’s recent crash, which saw its price dropping by more than 20%. 

The finance author disclosed that the cryptocurrency’s massive downtrend proves “once again that it is not a hedge against assets melting.” Earlier in July, the Bitcoin market was plagued with large scale liquidations, triggered by Mt. Gox’s BTC distribution plans and sell offs executed by the German government. 

Presently, the cryptocurrency is witnessing a significant decline in its price following the crash of the Japanese stock market and the adverse effects of regulatory pressures and macroeconomic factors. At the time of writing, BTC is trading at $57,333, marking a 13.09% decrease over the past seven days, according to CoinMarketCap. 

While speaking on BTC’s recent crash, Taleb compared the pioneer cryptocurrency to gold. The financial author suggested that gold was a superior store of value compared to Bitcoin. He illustrated this by noting that a piece of gold chain left on the ground for 10,000 years would still retain its intrinsic value, underscoring gold’s enduring value and stability over time.

On the other hand, BTC, as a digital currency, lacks the tangible and relatively stable characteristics of gold. Taleb contends that the digital asset falls short of being a real currency, highlighting the cryptocurrency’s shortage of fundamental attributes that make gold a reserve of value. 

BTC Dismissed As “Crazy Asset”

While highlighting Bitcoin’s limitations as a hedge against market crash, Taleb criticized the cryptocurrency’s fundamental nature as a digital currency. The financial author described the cryptocurrency as a “crazy asset,” highlighting that “crazy people” were driving its price upwards. 

He also stated that BTC was akin to a highly priced real estate in Manhattan used to attract the stock market. While he acknowledged that he has invested in the cryptocurrency, the finance author also asserted that Bitcoin was “useless.” Taleb further clarified that it was not useful in an economic system to have an asset that surges from $10 to $60,000 when looking for price stability.

Featured image from LinkedIn, chart from Tradingview.com