Bitcoin

2024-04-11 See all posts

The most common Bitcoin-as-a-store-of-value pushback I read is that its price action does not follow its "digital gold" narrative. Instead of being a stock-market-uncorreleated dollar hedge like gold, it trades like a tech stock.

Because of its youth and volatility Bitcoin is considered a risk asset on steriods -- something you buy when you have extra powder or with a small percentage of your portfolio. If the buyer lacks a long-term thesis on the asset or does not have enough cash in general, it will be the first asset sold when it is time to pay for things (note: do not do this; if you are going to need to sell your most reflexive assets during a market downturn, that is very -EV and you need to reconsider your portfolio). Bitcoin trades like a risk asset because...market participants trade it like a risk asset. Its short-term price action is so dominated by its volatility and positive correlation to other risk assets that you do not notice the fiat hedge property when you look at the chart.

Bitcoin-USD is an asset pair like any other. If one asset moves up, the other moves down in relation. My bullishness on the Bitcoin half of this pair comes only partly due to Bitcoin's properties; mostly it is based on the USD supply side of the equation.