Hong Kong analyst: next year's market Fluctuation is huge, Crypto Assets can be used for hedging

Article author: Ye Xiong Financial Strategy Analyst

Article Source: Oriental Daily News

2025 is expected to be a year of market resurgence and volatility. The recovery in Hong Kong, as well as the expansive economic policies introduced by the governments on both sides of the strait in 2024, will be crucial in determining their impact on the current economic downturn. In addition, the uncertainty surrounding Trump's trade policies with China will increase as President Trump takes office in January 2025.

Therefore, regardless of the size of the investor, hedge assets are very important for each stable portfolio. These assets can be gold, foreign currency, short-term government debt, and recently BTC and other major Cryptocurrencies. Each asset class has its own individual risk and return profile.

Gold is the most popular hedge asset. In the stable average rise in history, many investors, including governments, choose to hold gold as an asset. It is usually a good hedge against inflation, in addition to the volatility of its own value, investors also need to know that other risks associated with gold include the cost of storing physical gold bars and the risk of the issuer of paper gold.

Short-term government debt is very popular for institutional clients' portfolios, holding these debts to maturity usually yields enough returns to combat inflation. However, investors may need to be wary of the credit ratings of government bond issuance and their interest rate fluctuations.

Investing in foreign currency coins is another Hedging method, and the risk of loss is significantly higher than the first two assets. Due to the financial and political stability of currency coins such as the Swiss Franc, they are favored, making the Swiss Franc have a strong but stable value, which can be held when another currency coin depreciates due to dropIntrerest Rate or political instability. However, many factors will cause Fluctuation and changes in the direction of currency coins, so the use of this asset is influenced by a variety of factors and is very situational, requiring in-depth analysis.

Another newer asset class is Cryptocurrency, which has been legalized by most regulatory agencies around the world. BTC was originally introduced as a hedge asset similar to gold, but it is also a Hedging against government and political risks due to its decentralized nature. The author believes that although BTC has huge potential returns, the asset is still too Fluctuating to be considered a hedge asset. In addition, with the intervention of regulatory agencies and products based on Cryptocurrency, political risk and issuance risk have been reintroduced to the asset, making it no longer suitable as a hedge asset.

Investors should consider the strengths, weaknesses, and characteristics of each asset, as it is impossible to eliminate all risks when hedging. Investors must be able to identify the risks in each hedging asset and use them appropriately.