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4 reasons to show why Bitcoin is the best hedge against insecurity

June 13, 2020

The Bitcoin strategist at Kraken Pierre Rochard believes that despite its high volatility, Bitcoin is the perfect hedge against uncertainty.

In an interview with Cointelegraph, Rochard pointed out the separation between uncertainty and risk, while the former is quantifiable, the latter applies to situations in which probabilities cannot be calculated.

Because of its volatility, Bitcoin is a high-risk asset. The volatility of Bitcoin can, however, be covered through the use of derivative contracts.

4 reasons to show why Bitcoin is the best hedge against insecurity4 reasons to show why Bitcoin is the best hedge against insecurity

“You can ward off volatility by buying or selling futures,” he says.

As Rochard emphasized The quantifiable risks in life are much less than the non-quantifiable uncertainty, The latter can be effectively protected by Bitcoin due to four main properties.

The first is the high level of accessibility that allows anyone to send and receive Bitcoin without permission.On the contrary, the fiat currency is subject to a high degree of uncertainty as it depends on third-party custodians.

The second property is the low probability of seizures, Bitcoin is more difficult to seize than other assets.

“When you look at the expected cost of seizing Bitcoin, it is higher than the expected cost of seizing gold and physical cash, especially a bank account.”

The third is resistance to censorshipThis is provided through transactions that are transmitted over the network and then recorded on the blockchain.

As Rochard emphasized, transactions are unlikely to be hijacked due to the financial incentives miners receive for the mined blocks.

In the end, The fixed limit on Bitcoin supply minimizes the uncertainty that affects all currencies that depend on central bank monetary policy.

Rochard notes that by exercising the power to print an unlimited amount of money, governments “maximize the price stability of their currency.”“However, this entails the cost of increasing monetary policy uncertainty.

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