Grayscale Investments: Bitcoin Could be Used As a Hedge Against Financial Instability

Grayscale Investments, a global leader in digital asset management, published a case study to show how Bitcoin could be used as a hedge against financial instability. 

In the case study, the investment firm used the US-China trade war to argue why Bitcoin could be used as a hedge against financial instability. According to Grayscale, Bitcoin’s potential as a store-of-value ensures that it will perform strongly during both regular economic cycles and liquidity crises.

Grayscale says in the report:

“With continued adoption, Bitcoin represents a transparent, immutable, and global form of liquidity that can provide both wealth preservation and growth opportunities. As a result, we believe it deserves a steady strategic position within many long-term investment portfolios.”

Grayscale furthermore noted that Bitcoins’s price is defying expectations and going up in the middle of the U.S.-China trade war:

“While the risk asset drawdown is still in its very early stages, Bitcoin is on the rise as these risks are just beginning to show up in other asset and currency prices. Since Trump first announced the tariff hike in May, Bitcoin has generated a cumulative return of 104.8% through August 7, versus an average of -0.5% for the twenty other asset classes, markets, and currencies below during the same period.”

The advice from Grayscale to see Bitcoin as a possible hedge against financial instability does not come as a surprise. In July, Barry Silbert, Founder & CEO of Grayscale, mentioned that trillions of dollars could flow into Bitcoin over the next 25 years.

According to Silbert, there is an imminent generational wealth transfer that could change the dynamics of a store of value (SoV) investing in the United States. The baby boom generation, born between 1951 and 1969, is slowly retiring. According to Silbert, this will mean that there will be a massive generational wealth transfer.

Talking about the generational wealth transfer, Silbert commented:

“Over next couple of decades, there is $68 trillion of wealth that’s held by baby boomers and the older generation, in the US alone, that’s going to be handed down to Generation X and millennials… My theory is that whatever of that 68 trillion that is currently in gold, I don’t think it’s going to stay all in gold.”