Hedge Your Bitcoin Position With Gold

The price of Bitcoin fell below $10,000 this week. It rallied once again and pushed back above that key level, but turmoil continues to plague the world of cryptocurrencies.

We’ve been advising a diversified approach to crypto investing. Recently, Franco-Nevada president and CEO made a similar recommendation.

If you need to hedge your Bitcoin position, buy gold.”

And now might not be a bad time to hedge.

There continues to be news of government regulatory crackdowns on Bitcoin and other cryptos. As CNBC reported,  South Korea’s Financial Service Commission confirmed new measures, such as bans on anonymous trading accounts, had been implemented. Meanwhile, the US Securities and Exchange Commission also announced Tuesday that is has obtained a court order to freeze the assets of an initial coin offering claiming to have raised $600 million.

Adding further turmoil to the crypto world, last week, hackers stole some $350 million worth of cryptocurrency from the Coincheck exchange.

Harquail also serves as chairman of the World Gold Council. Last week, the WGC issued a report making the case that cryptocurrencies are no substitute for gold. The organization isn’t necessarily negative on cryptos. Its analysts simply argue that while they have some similarities, gold and cryptocurrencies are very different.

In an interview with Mining Journal, Harquail called Bitcoin a “risk-on” investment. Gold provides a counterbalance.

For investors looking to protect their capital, gold is the ultimate ‘risk-off’ holding. It has low to negative correlations to other investment classes. Gold can improve risk-adjusted returns within a broader portfolio.”

In other words, gold can provide excellent balance to cryptocurrencies. Diversifying a crypto portfolio with precious metals can help mitigate some of the potential downsides and put investors in an overall stronger financial position.

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