‘The Black Swan’ author says Bitcoin a poor hedge against market meltdown

Nassim Taleb, author of The Black Swan and adviser for Universa Investments, said during CNBC's Squawk Box on Aug. 6 that the cryptocurrency market’s abrupt downturn on Aug. 5 shows Bitcoin (BTC) is a poor hedge against a systemic meltdown. 

“Bitcoin is proving once again that it’s not a hedge against your assets melting,” according to Taleb, whose book ‘The Black Swan’ explores the science of randomness and extreme outliers.

On Aug. 5, the entire crypto market saw a $510 billion drop in total market capitalization amid a marketwide downturn dubbed “Black Monday.” Following the sell-off, over 60% of the top 50 cryptocurrencies lost all the gains made during 2024, according to CryptoQuant.

Other asset classes bled, too. The S&P 500—an index of large stocks in the United States—fell by more than 5%, and Japan’s Nikkei plunged by around 12%. However, according to CoinMarketCap, BTC’s fall was worse, dropping by some 18% on the day.

Bitcoin performed worse than other assets because it is “a speculative asset that seems to behave like high-price real estate in Manhattan,” existing mainly to “track the stock market,” Taleb claimed. He said gold is a superior store of value because with “a gold chain, if you put it on the ground 10,000 years, it will still be gold."

Bitcoin is sustained by a global decentralized network of miners estimated to comprise approximately 1 million individuals. It has proven highly resilient since its launch in 2009, but anxieties persist about Bitcoin’s longevity, especially as its fixed supply of mining rewards—21 million BTC in total—dwindles.

The “Black Monday” crash was triggered by the Bank of Japan’s July 31 interest rate hike and a subsequent spike in the price of the yen in currency markets. This drove up costs for foreign borrowers with yen-denominated debt—of which upward of $2 trillion was outstanding just before the crash, according to a report from ING Bank.

It fell especially hard on the crypto market, which collectively borrowed nearly $40 billion to finance risky leveraged trades, according to CoinGlass.

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