Not a hedge, just a high beta tech stock

[Pekelo]

If somebody still harbours the misbelief that cryptos are hedge against the general market, the last 2 days should take away any doubt. Major cryptos took as big of a fall as any high beta tech stock, and that is what a crypto is.

So if you are searching for a hedge, keep searching because cryptos ain't it...

P.S.: I guess the BTC at 100K by year's end didn't happen. Maybe this year?

 

[Collagen]

Perhaps You have missed to look at treasury bond..

 

[Mazedonia]

What has this to do with OP's statement? Did he state that no other assets correlate with equities? His statement is absolutely correct. Do the stats yourself and calculate covariance between equity and btc returns and you shall see this is true, especially when equities lose value. This has happened for a very long time now. Cryptos are equally exposed to flight for safety as equities are.

Perhaps You have missed to look at treasury bond..

 

[johnarb]

What has this to do with OP's statement? Did he state that no other assets correlate with equities? His statement is absolutely correct. Do the stats yourself and calculate covariance between equity and btc returns and you shall see this is true, especially when equities lose value. This has happened for a very long time now. Cryptos are equally exposed to flight for safety as equities are.

I thought you wanted to block the Crypto Assets forum?

Admit it, you like hanging out in this forum with the crypto degens coz it's loadz of fun

 

[Mazedonia]

Oh was this posted in the crypto forum? My oversight. My claim holds, however. Anyone who puts a little effort into it can calculate those correlations.

I thought you wanted to block the Crypto Assets forum?

Admit it, you like hanging out in this forum with the crypto degens coz it's loadz of fun

 

[johnarb]

Oh was this posted in the crypto forum? My oversight. My claim holds, however. Anyone who puts a little effort into it can calculate those correlations.

Well, there were a lot of efforts actually put into it

In the short term, Bitcoin and cryptos can have high correlation to the stock market and other assets

In March 2020 crash, bitcoin and cyrptos crashed along with everything. Liquidity crunch is to blame

Since then, Bitcoin btc has gone up 1500% and FAANG stocks or the SPY stocks or DOW stocks did not go up as much

https://decrypt.co/63468/is-bitcoin-price-correlated-to-stock-market

"Although we can say that Bitcoin has been generally positively correlated with the stock market in recent years, it's not a very high correlation. In fact, Bitcoin is more correlated with gold — another safe-haven asset."

https://www.marketwatch.com/story/i...ions-higherand-lowerthan-coinbase-11622826320

"The crypto asset certainly has a low correlation with stocks, as represented by the S&P 500 index"

 

[GlobalMacro90]

I'll add that while I totally agree that BTC isn't a hedge, it is uncorrelated with stocks and bonds. Now in a crisis when equities are getting killed then BTC will go down too (hence not a hedge).

In fairness to bitcoin though, this is true of a lot of stuff. Other stocks, corporate bonds, high yield bonds, all commodities except gold, all currencies except USD, Yen get smacked in a real crisis.

BTC is uncorrelated to stocks tho. Adding an uncorrelated asset (that has >150% annualized returns) to a portfolio is like quant magic.

Attached is rolling 52-week correlation between BTC and SPX. Notice this oscillates around 0 aka not correlated. MAYBE you can argue that it has a very small positive correlation, but its very small

Point is - while not a hedge still super useful from a portfolio standpoint

 

[Collagen]

What has this to do with OP's statement? Did he state that no other assets correlate with equities? His statement is absolutely correct. Do the stats yourself and calculate covariance between equity and btc returns and you shall see this is true, especially when equities lose value. This has happened for a very long time now. Cryptos are equally exposed to flight for safety as equities are.

OP talks about hedge against general market (specifically stocks) so yes pointed out to bonds is relevant. You probably never heard of risk parity fund so well It doesn't matter for You.

And about positive/negative correlation and so on. It's another pointless metric, as when You really need it for hedging purposes It usually vanish or become strongly correlated to stocks indexes during a market crash scenario. You can ask gold bugs about that and during these times to bond holders. The only way to really hedge is to go long $ (to some extent) and long vix.

To conclude, crypto is nothing other than another asset classes, in a bubble condition that It's going to inflate like everything other else during a market crash. Hopefully this will happen soon.

 

[GlobalMacro90]

Wow, we need a quant 101 class in this forum.

NOT BEING A DIRECT HEDGE DOESNT MEAN ITS 'POINTLESS'

Low correlation still greatly improves return/risk metrics (sharpe ratio) of a portfolio, even if correlations go to 1 in a crisis. It's not a hedge, but still very useful in increasing the quality (return/risk ratio) of a portfolio.

 

[vanzandt]

This is a crucial level.
What it get to earlier, like 40.6?
41.9 as I type.

Albeit I don't own any, I do enjoy watching it.
I think it's a safe buy right now, but I'd be ready to stomach seeing 35.7 if worse comes to worse.
I would NOT use a stop, because if it does drop that low it'll be on low volume at the exact right time that that amount of volume could trigger that percentage of a drop.

Up until now I've had a pretty decent record for the last two years charting this thing. Fwiw, I told a friend who wanted to drop $500K in to wait until $41.6 last week. I have not talked to him yet, but I do know he opened an account somewhere so he might have got in. I did text him this AM. The only reason I mention this is because since I don't own any, this is as close to putting my money where my mouth is regarding buying any. I try not to give friends bad advice, they kinda trust me on market stuff.

So we'll see. Watch the volume though. If this in fact is not the bottom, use 1 hour candles. If it starts creeping down hour by hour on small trades, and gets south of $40K (or close), rest assured you'll get that big painful spike down at some point. That will be the bottom, wherever that spike settles within a 2 candle (hour) time-frame. If I had to guess where that would be, again assuming we're not there yet, and assuming the worst, I'd say right around 35.8.

@Pekelo pointed out that it is behaving like a high beta tech stock, and I agree. That has always been what I have based my charting on when predicting levels on this thing. I may not own any, but I've watched charts of 100's of high volatility stocks day in and day out for quite a long time now where I did have plenty of skin in the game.
There is a difference though, even compared to the most high vis bs stock. It's NOT a stock. That's the difference, and in a way, that makes charting it on a TA basis much easier. If that makes any sense.
But again, we shall see.