Bitcoin Surpasses Bonds as a Hedge Against Monetary Debasement, According to Bloomberg Analyst

Bloomberg Intelligence crypto market analyst Jamie Coutts has suggested that Bitcoin (BTC) may outperform traditional bonds as the risk of US dollar debasement increases. His comments, made during a discussion on the future of market volatility and Bitcoin’s role in global asset allocation, highlight the evolving landscape for investors.

Coutts observed a significant change in the volatility profiles of global assets when compared to Bitcoin since 2020. He pointed out that hard assets such as Bitcoin and Gold have experienced decreases in volatility, with Bitcoin’s volatility down by 52% and Gold’s by 16%. In contrast, global fixed-income assets and equities have seen their volatility levels rise by 53% and 33%, respectively.

Delving deeper into Bitcoin’s volatility, Coutts indicated that if one looks beyond its early years (2011-2014), the cryptocurrency has shown a slight downward trend in volatility since 2017. This trend is especially notable against the backdrop of rising U.S. dollar values and 10-year Treasury Yields, alongside a declining global M2 money supply.

Despite a nuanced short-term outlook, Coutts emphasized Bitcoin’s potential to act as a risk diversifier, which could enhance risk-adjusted returns. He noted significant improvements in Bitcoin’s risk-adjusted performance during recent bear markets, highlighting that by 2022, it had outpaced traditional fixed income and certain equity markets on this basis.

Looking into the future, Coutts predicted that asset allocators may start favoring better hedges against monetary debasement, with Bitcoin emerging as a clear candidate. He argued that traditional investment portfolios would have performed better had they included a small allocation to Bitcoin, substituting it for some bonds over the last seven years.

To illustrate his point, Coutts compared a conventional 60/40 portfolio (comprising US equities and bonds) with a modified 60/39/1 portfolio that added 1% of Bitcoin at the expense of bonds. The latter configuration yielded an excess return of 10.58% (1.32% annualized) during a backtest period from 2015 to 2022, while also improving the Sharpe ratio from 0.604 to 0.664.

As of Thursday, Bitcoin was priced at $27,068, reflecting a 2.9% increase over the past 24 hours.

This article was created with AI assistance and reviewed by an editor.