Is Bitcoin A Safe Asset?

Is Bitcoin A Safe Asset?

Is bitcoin a safe asset? David Andolfatto, vice president of the Federal Reserve Bank of St. Louis, acknowledges in his blog, “MacroMania,” that bitcoin can be volatile over a short time span. But when people speak about safe assets, it’s not the same as providing a stable rate of return.

Andolfatto, in considering what makes an asset truly safe, thinks bitcoin does have some important safety properties to consider, either for personal investing or policymaking.

What’s A Safe Asset?

A safe asset is one people go to during uncertain economic times. In normal times, a safe asset is one that people hold despite a low return rate, possibly due to its use as a hedge, or liquidity characteristics.

Many view U.S. Treasuries (UST) and U.S. dollars as safe since they are fairly risk-free in their nominal return rate. A USD gives a zero nominal interest rate. A UST also gives a zero nominal interest rate along with full principal payment upon maturity.

Andolfatto points out that there’s more to thinking about a security’s

Read more ... source: TheBitcoinNews

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