Basel committee recommends conservative covering for BTC


Bitcoin got an interesting review from the Bank for International Settlement’s Basel committee has reported today at Coindesk.


Today, Coindesk writer Jamie Crawley covers a judgment by the committee that decentralized cryptocurrencies like Bitcoin should be covered 100% by banks that have exposure.


The argument is that since cryptocurrencies could theoretically go to zero and are unconnected to national fiat systems, it’s fair to expect big holders to cover for potential losses.


The committee sets up a distinctive split between two fundamental types of currencies. On one hand, the committee recommends “additional guidance” for stablecoins and tokenized assets that are tied to fiat currencies so that they have less volatility.


Then for the thoroughly decentralized cryptocurrencies, they suggest this 100% cover requirement, which some fans of Satoshi and co. see as unfair.


Reddit, where ground-level investors need to talk about these kinds of developments, is staying mum on the subject, but some analysts point out that equities can be more volatile than crypto.


“While Bitcoin continues to be a volatile asset, it may surprise researchers and investors as to what other major assets have been more volatile than Bitcoin,” write Gabor Gurbacs, Kyle DaCruz, and Denis Zinoviev at VanEck, a firm that has been trying to get the SEC to greenlight a Bitcoin ETF. “In our long-term study of Bitcoin, we had compared Bitcoin correlations to traditional asset classes and now see another interesting recent trend with its volatility. In our current volatility research, we compared the 90 day and year to date volatility—as measured by their daily standard deviation[1] as of November 13, 2020—of Bitcoin against the constituents of the S&P 500 Index. We found that Bitcoin has exhibited lower volatility than 112 stocks of the S&P 500 in a 90 day period and 145 stocks YTD. While there are no U.S. Bitcoin exchange traded funds (ETFs) available today, we believe such products may show similar volatility characteristics—based on the comparison above—as many stocks in well-known indices and ETFs, such as the S&P 500 and related products.”


Should BTC be thoroughly covered by bank holders? Tell us in the comments.