Bitcoin is a hedge and diversification tool

Representatives of traditional financial institutions are gradually beginning to view Bitcoin (BTC) asuncorrelated asset that can act as an effective hedging instrument.

Earlier this concept was actively promoted by Morgan Creek Digital co-founder, Anthony Pompliano, now it was supported by the chief economist of the Chicago Mercantile Exchange, Bluford Putnam, Cointelegraph reports.

BTC price goes against the market

Bitcoin is a new type of decentralized, borderless asset. This provides the conditions necessary for the BTC price movement to not be correlated with traditional markets.

The statement about Bitcoin as an uncorrelated asset is confirmed by the short but vivid history of the digital market.

“It is doubtful that Bitcoin will correlate witheconomic factors or with traditional equities and fixed income securities. In this case, BTC can serve as a tool for portfolio diversification."“Said the Chicago Mercantile Exchange chief economist, Bluford Putnam.

A similar theory for a long timeadvocated by Anthony Pompliano, arguing about the need for investment in bitcoin, as a method for diversifying risks. Among managers of traditional financial institutions, such an opinion is only beginning to gain popularity.

Despite the volatility of bitcoin prices, Putnam said the lack of correlation between coins could make it a valuable, albeit small, addition to portfolios.

“Since bitcoin is very volatile, only a very small distribution - say, 2% of the portfolio - can reduce the risk if there is no correlation”- said Putnam.

In August 2019, Pompliano predicted that bitcoin would end up in all institutional portfolios.

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