With stocks and bonds, Bitcoin falls in a lockstep (Not Much of a Hedge)

With stocks and bonds, Bitcoin falls in a lockstep (Not Much of a Hedge) ...

Bitcoin advocates have been warned for a while that the world''s largest digital currency may mitigate inflation and decline by stocks and bonds. This year, however, stocks, bonds, and bitcoin have dropped in tandem.

The S&P 500 has experienced a 15% drop in total returns, while the Bloomberg Aggregate Bond Index reported a 10% drop, and bitcoin has dropped 37% to $30,029.

According to the Wall Street Journal, the three-month relationship between digital currencies bitcoin and ether and major US stock indices reached a new high last week. The correlation reached 0.67 to 0.78, with one representing a complete positive correlation and 0 representing no correlation.

Bitcoin has recently correlated strongly with inflation, as are consumer prices. In the 12 months through April, the cryptocurrency slowed by 28%.

Bitcoin supporters believe that the currency is a value-added object. However, bitcoinat this point looks more like a storage area.

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Not a Medium of Exchange

Bitcoin doesn''t function like a true currency, which is a medium of exchange for goods and services. Bitcoin isn''t widely utilized in legitimate commerce, as it makes it difficult for both buyers and sellers to value their transactions in dollars.

Moreover, large use of bitcoin has caused currency transactions to slowed, rebutting bitcoin users'' arguments that the cryptocurrency increases the value of financial transactions.

Bitcoin appears to be here to stay. Both individual and institutional investors are heavily involved in the bitcoin market. There are also a host of legitimate financial institutions. Bitcoin had a market capitalization of $572 billion as of May 17.

One possibility for digital currencies in the United States is that the government creates an official digital currency that will be overseen by the Federal Reserve. This digital currency may then be used extensively for commerce.

It''s not a huge stretch, as many of our transactions already are completely digital think credit cards. In that case, bitcoin might simply retain its status as a source of speculation.

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