Bitcoin is a Stock, Not a Dollar Hedge

When people talk about Bitcoin, they think it’s a hedge for the death of the U.S. Dollar and a portfolio hedge against stocks. Wrong. Bitcoin is nothing but a very volatile stock.

This figure plots daily Bitcoin returns against returns of the US Dollar index (left) and then against the S&P 500 (right). (You can click on the figure to make it bigger.)

There is no relation between Bitcoin and the U.S. Dollar. However, there is almost a 1 to 1 relation between Bitcoin and the S&P 500.

Thus, adding Bitcoin to your portfolio is just adding a really really volatile stock to your equity portfolio.