usdollar

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.

By Christopher Schwarz, ago

U.S. Celebrity’s Endorsement of Currencies

Word yesterday an NFL Player is getting paid half his salary in Bitcoin. (it’s not true actually) But I thought it would be interesting to go back and look at a very famous endorsement of non-USD by a celebrity: Jay-Z and the Euro.

In Jay-Z’s “Blue Magic” video, instead of showing off those Franklin’s with small faces (aka “Money Ain’t A Thang”), Jay-Z flashed 500 Euro Notes.

How did that work out? Well, let’s see what the Euro/$ exchange rate did after the video.

The Euro topped out just a few months later and is still about 30% lower in value today then back in 2007. (I’m even ignoring the negative German bond yields.)

Bottom line: Jay-Z made the classic naive investor error: Buy high.

By Christopher Schwarz, ago