Bitcoin's Turning into Insurance Policy Against 'Irresponsible' Central Banks, Analyst Argues

  • Bitcoin (BTC) could help hedge against "irresponsible" monetary policies used by central banks, analyst claims.
  • Investors may lose confidence in traditional financial instruments due to poorly managed economic policies.

Travis Kling, the founder and chief investment officer at Ikigai Asset Management, a digital asset hedge fund, recently said “there is a really a good chance we have something better than gold.”

Kling, a former portfolio manager at Point72 Asset Management, explained that bitcoin (BTC) investments may be comparable to credit default swaps (CDS), which are similar to insurance policies that issue payouts when borrowers default on debt. Referring to a CDS as a traditional hedge “against fiscal and monetary policy irresponsibility”, Kling noted that the “mass adoption” of alternative forms of investments (as a hedge) such as bitcoin could occur in economies suffering from hyperinflation.

During the Wall Street financial crisis in 2008, investor confidence in CDS fell to an all-time low as the American International Group (AIG), a New York-based global finance and insurance corporation and one of the largest issuers of CDS, almost collapsed.

At present, Kling is concerned by the increasing US debt (which stands at roughly $22 trillion) and the seemingly drastic measures taken by the Federal Reserve and the central banks of other nations to stimulate economic growth. According to several analysts, consistently low interest rates coupled with an increasing budget deficit might result in hyperinflation - which would essentially erode the value of fiat currencies including the USD.

"Writing The Script" For "Mass Adoption"

"That is how you would write the script" for the "mass adoption" of a new type of currency or asset class that isn’t backed or controlled by centralized world governments, Kling argued. His comments came during a Cayman Alternative Investment Summit held in Grand Cayman, the largest of the Cayman Islands, a British Overseas Territory in the Caribbean.

Notably, digital asset startups have continued to attract investments even during the prolonged crypto bear market which is now the longest in history. Morgan Creek Capital Management has announced the launch of a cryptocurrency fund that is scheduled to complete its initial fundraising round this coming Friday. Mark Yusko, Morgan Creek’s founder and CEO, explained that the new fund will focus on the “pick and shovels” of the crypto space and on projects working to help improve the ecosystem’s infrastructure.

According to Yusko: 

[Morgan Creek Capital Management] believes bitcoin will be one of, if not the, largest network on the planet. We are in the middle of the greatest wealth opportunity ... It's beyond any of our imaginations.

Morgan Creek To Invest In Blockchain-Based Insurance Platform

As noted by CNN Business, Morgan Creek is investing in a firm that aims to use blockchain technology to streamline the title insurance business. Traditional title insurers usually require that clients submit a lot of paperwork in order to verify property ownership and transfers. However, a blockchain-based title insurance system would significantly reduce the amount of paperwork involved and eliminate costly intermediaries from the process, Yusko claims.

Criticizing the traditional insurance claims process, Yusko remarked:

Title insurance — it's just a stupid business. Why do we need to pay $1,000?