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Bitcoin Strategist at Kraken, Pierre Rochard, explains why Bitcoin is the perfect asset against uncertainty despite its high volatility.
Pierre Rochard, a Bitcoin strategist at Kraken, believes Bitcoin to be the perfect hedge against uncertainty, despite its high volatility.Â
In an interview with Cointelegraph, Rochard pointed out the dichotomy of uncertainty and risk. While the former is quantifiable, the latter applies to situations where the odds canât be calculated.Â
Due to its volatility, Bitcoin is a high-risk asset. However Bitcoinâs volatility can be hedged against using derivative contracts.Â
âYou can insure yourself against volatility by buying puts or selling futures,â he points out. Â
As Rochard noted, the quantifiable risks are far smaller than the amount of unquantifiable uncertainty. The latter can be effectively hedged against by Bitcoin, due to four major properties.Â
The first property is its high degree of accessibility, which allows anyone to send and receive Bitcoin in a permissionless way. Conversely, fiat currency is subject to a high degree of uncertainty, as it relies on third-party custodials.Â
The second property is seizure resistance, which makes Bitcoin harder to confiscate than other assets.Â
âIf you look at the expected cost of seizing Bitcoin, itâs just greater than the expected cost of seizing gold or physical cash, especially a bank account."Â
The third is censorship resistance, which is provided by the way transactions are broadcasted to the network and then recorded on the blockchain.Â
Rochard stated that transactions are unlikely to be hijacked given the economic incentives given to miners for mining blocks.Â
Finally, the fixed hard cap of the Bitcoin supply minimises the uncertainty affecting all currencies that depend on central banksâ monetary policies.Â
By exerting the power to print an unlimited amount of money, Rochard states, governments âmaximise the price stability of their currency." That, however, comes at the cost of increasing monetary policy uncertainty.Â
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Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.