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ECONOMY: A Hedge Against Geopolitical Risk?

BITCOIN – A Hedge Against Geopolitical Risk?
By: Iain Fraser - Consultant Editor
Malaga Technology Centre


So is Bitcoin really a hedge against Geopolitical Risk? Steve Anderrson explores the links in
his latest piece he uncovers a recent study has shown Bitcoin as a hedge fund that is against
geopolitical risk. The very first research paper that studied the relation of Bitcoin and
Geopolitical risk (GPR) has been published, and the paper shows that there is a very significant
relationship between the two.

The conclusion in the research paper is that only bitcoin has been correlated to the GPR index of
Caldara and Iacoviello of the year 2018. This index shows the level of geopolitical risk by being
able to calculate the number of geopolitical events that occurred around the globe and appeared in
the news. It takes all the leading newspapers of the world to use their reporting as it’s the source
of information.

The research had included five cryptocurrencies in its study, and these included Bitcoin, Litecoin,
XRP, Ethereum, and Stellar. The results from the study show that the least correlated crypto to
geopolitical events is Ethereum (ETH).

The research paper said that out of the cryptocurrencies that they kept understudy the jumpiest
cryptocurrencies are Litecoin (80), Ripple(74), Bitcoin (71), whilst representing 3.38 percent,
3.26 percent and 3.00 percent of the days.

On the other hand, the least jumpy crypto, Ethereum, has only 38 jumps and represent 2.47 percent
of the days in total. When the data of Bitcoin, Litecoin, and Ethereum are limited to four years
and three months, most of the jumps have been made in the years of 2016-17.

Because of it’s open and code nature, Bitcoin probably has reacted faster than all the other assets
that are because of it’s global nature. The global nature of Bitcoin basically means that a small
fruit seller can also trade on their laptop or even the villagers of any village can trade on the
computers of a young man who has an internet connection if they don’t have a connection themselves.

About Steve Anderrson
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain. 

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