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Barron’s Recommends Hedging A Stock Portfolio, But What About Bitcoin?

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin, Cryptocurrency news, Technical analysis
Reading Time: 3 mins read
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Barron’s, an American finance publication operated by Dow Jones & Company, has given a rare suggestion to its audience to hedge their stock portfolios ahead of the upcoming election. The risk hanging over the market could also be responsible for the recent collapse in Bitcoin.

Given the recommendation, how should crypto investors consider hedging their portfolio too? Or should stock market investors consider hedging against uncertainty with Bitcoin?

Barron’s Warns Of Stock Market Decline, Recommend Hedging Portfolio Ahead Of “Weird” Election

In a new report from financial market magazine Barron’s, the firm advocates hedging a stock portfolio against the coming uncertainty surrounding the 2020 presidential election.

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“Portfolio hedging is something we rarely endorse because most investors are terrible at it, and the market generally prices downside put options with such intense fear premiums that most people stand a better chance of winning the lottery,” the report starts off with.

Even with lottery-like odds, Barron’s is still saying it is wise for even unskilled investors to try to hedge their portfolio against risk. Barron’s is recommending “put” options on the S&P 500 as the ideal hedge, but there are several ways an investor can hedge against risk.

Related Reading | VIX Raising “Red Flag” On Stocks, Could Be Bearish For Bitcoin

For example, investors are currently taking profit on all of these assets and fleeing into cash in preparation for uncertainty. It prompted the S&P 500 and Bitcoin to sell-off over the last 24 hours after reaching 2020 highs.

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Barron’s points to election results that are likely to be heavily contested, leading to a prolonged showdown and stressful situation for investors.

They also highlight how tensions in the United States surrounding political and racial views have led to protests, violence, and the highest increase in gun ownership in years.

Lastly, they call out how the VIX – a measure of expected stock market volatility – always rises during election years, and that this year is especially heightened due to the pandemic.

bitcoin sp500 vix

BTCUSD Versus S&P 500 Versus VIX Daily Comparison Chart | Source: TradingView

How Can Crypto Investors Hedge Their Bitcoin and Altcoin Portfolios Against Risk

As for how crypto investors can hedge their portfolios, there’s always cash, Tether, or simply holding Bitcoin for the long haul. If things get particularly bad in markets ahead of the election, high-risk altcoins may take the brunt of the beating.

Related Reading | This Monthly MACD Bearish Divergence Warns Of Imminent Bitcoin Crash

Crypto investors would be wise to reduce altcoin exposure if Bitcoin continues to decline. Crypto investors that are holding spot Bitcoin, can potentially open a short position to hedge against any coming drawdown.

Finally, the most confusing factor in Bitcoin’s use as a hedge against inflation and economic uncertainty. Some have called it an insurance policy of sorts, but the fact remains that Bitcoin is unlike other assets, and given the asset’s scarcity and recent halving, it could be immune to the impact of the election.

If Bitcoin can rise during even the most uncertain times the world has ever faced, stock market investors may seek to hedge with Bitcoin, much like Nasdaq-listed MicroStrategy has.

Whatever way an investor chooses to hedge, Barron’s advice remains valuable: It is time to hedge against the election, any way you can.

Tags: bitcoinbtcbtcusdBTCUSDTcryptoxbtxbtusd
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.

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