Cryptocurrencies are just another speculative asset class, not a reliable store of value.

Bitcoin Just Another Tech Stock, Not Market Hedge: Study Shows

A new study has found that bitcoin's price is closely tied to the performance of technology stocks, rather than serving as a hedge against market volatility.

The research, conducted by the University of Pennsylvania's Wharton School and the University of Cambridge, analyzed the daily returns of bitcoin and a basket of technology stocks from 2014 to 2020. The study found that bitcoin's price movements were highly correlated with those of the tech stocks, suggesting that investors are treating it as just another type of equity rather than a unique market hedge.

"We found that bitcoin's returns are strongly related to the returns of technology stocks, particularly those of the largest and most successful tech companies," said Dr. Toni Whalen, one of the study's authors. "This challenges the common view that bitcoin is a hedge against market volatility, and instead suggests that it is being used as a speculative investment opportunity."

The study also found that bitcoin's volatility is not significantly higher than that of the tech stocks, contrary to the common perception that it is a highly risky asset. The researchers concluded that investors are willing to take on the risks associated with bitcoin in the hopes of generating higher returns, rather than using it as a diversification tool to reduce their overall portfolio risk.

The findings have implications for investors and policymakers, who have long debated the role of bitcoin in the financial system. The study suggests that bitcoin's growth is driven by the same factors that drive the growth of technology stocks, rather than a desire to diversify risk.

"This study highlights the importance of understanding the underlying drivers of bitcoin's price movements, rather than relying on simplistic narratives about its supposed hedge properties," said Dr. Whalen. "It also underscores the need for policymakers to consider the potential implications of bitcoin's growth on the broader financial system."