How Bitcoin was a Hedge Against the Falling Loonie in 2015

At the end of 2015, bitcoin was declared as the best performing investment of the year. The global markets were in a state of turmoil with crashing stock markets, negative interest rates, capital controls and oil at a yearly low.

Bitcoin started the year with a massive panic sell-off as Bitstamp reported being hacked to the tune of $5 million USD. The price fell to a low of $166, which marked the bottom of a bear trend. 

Accumulation Phase

Throughout the year prices were consolidating within a trading range between $200-$300. The volatility index was lower than 2014, bringing stability to the markets. 

A stable period of consolidation after a downtrend is known as the accumulation phase of a market and is the first signs of a new bull trend. Knowing this, I opted to keep all my trading profits in bitcoin because a trend reversal seemed likely. 

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The accumulation phase requires patience and a strong contrarian mindset because market sentiment is often at its lowest. That said, the media was being hammered with bullish news as the Bitcoin industry moved into the Wall Street adoption cycle. I suspect that smart institutional investors may have quietly bought up the supply that was shaken out from weak hands. 

The Weak Canadian Dollar

2015 also marked a weak Canadian dollar, especially when paired against the USD. There’s been a strong correlation between the Canadian loonie and oil prices. It’s estimated that oil and gas make up 40% of Canada’s net export and the drop in global oil prices brought down a currency that was once on par with the USD just a few years ago. 

Most Canadians are insulated from a devalued currency until they need to travel abroad and pay a hefty premium on everything.

My Personal Experience

Although Bitcoin is used predominantly as a speculative investment, some of us have integrated it as a part of our everyday lives. When people ask me about the utility of Bitcoin I can refer to my own personal experience. 

Scales of justice with bitcoin symbol and hundred dollar billsAs a full-time bitcoin trader and entrepreneur I work over the internet. International business tends to be priced in USD so I often make an additional 20-30% once I convert into CAD.

I also get paid exclusively in bitcoin because its cheaper and quicker than any other payment option. Quadrigacx also offers free withdrawals and I have a “no fees” bank account. What this means is that I can receive money from anywhere in the world and have it deposited into my bank account for free. 

Last year I decided to save any extra money in bitcoin, which ended up doubling in value as a result of November’s bull run.  

Bitcoin as a Hedge Against Devalued Currencies

Looking at bitcoin’s 52 week high and low for 2015 we see a 200% gain over the USD. For Canadians the gains were around 225%, which gave us an additional 25% to hedge against our devalued currency. 

Now imagine how important bitcoin is as a store of value for countries with severe hyperinflation like Argentina. Looking at the 10 year chart we can see that the Argentine peso has lost 80% of its value.

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Bitcoin is so much more than just a new form of internet money, its an alternative economy that can give individuals financial sovereignty. 

 

 

 

Rocky

Crypto trader and investor. My preferred style is swing trading and longer term accumulation plays. I help coach traders and share my trades over at skillincubator.com
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