- Billionaire macro investor Paul Tudor Jones admitted that his fund invests in Bitcoin.
- Tudor Investment Corp’s Tudor BVI fund notes that it holds a “low single-digit percentage” of Bitcoin futures.
- The announcement sends bitcoin prices above $ 10,000 overnight, and leaves three biggest takeaways from cryptocurrency’s new institutional milestone.
Most in the Bitcoin community had never heard of Paul Tudor Jones as of Thursday.
But the emerging group of developers, finance professionals, anti-fiat activists and speculators cheered when the famous multi-billion dollar macro investor announced that his fund would invest in Bitcoin. In a letter on the market outlook titled “The Great Monetary Inflation,” Mr. Jones said his Tudor BVI fund could hold up to a “low single-digit percentage” of the cryptocurrency futures.
The herd cheered and let Bitcoin prices soar over $ 10,000 in a wild night rally, with some top analysts in the crypto space calling Mr. Jones’ entry into the Bitcoin club “big”. Barry Silbert, a celebrated venture capitalist, cited an excerpt from Mr. Jones’ investment letter.
The statement served as one of the most significant validations of Bitcoin as digital gold, a claim that has met with skepticism from widespread gold bugs like Peter Schiff. But Mr. Jones did his homework comparing the two characteristic assets – this is now the first major insight from his letter.
# 1 seen gold
Mr. Jones drew an analogy between Bitcoin and gold in the mid-1970s. That was the time when the yellow metal was first produced for the futures market. The yellow metal had previously tripled its price in a bull market, but corrected more than 50 percent two years after the future was introduced.
Gold served as a reminder of Bitcoin, noted Mr Jones. The cryptocurrency rose exponentially before launching its first futures in January 2018. However, she later corrected it by up to 80 percent.
Comparison of gold and bitcoin prices after the introduction of futures | Source: Bloomberg
The gold spot price quadrupled over the next three years, having bottomed out in 1977, beating its previous highs. Mr Jones said the same thing happened to Bitcoin after it bottomed out in December 2018. Its surge above $ 10,000 is part of a bigger price rally.
# 2 Bitcoin haters might be pseudo-intellectuals
Mr Jones saw a growing role for Bitcoin in the macroeconomic space, particularly amid the collapse in financial markets caused by the coronavirus. His views were at odds with what legendary investor Warren Buffett had said about cryptocurrency.
“A rat poison squared,” the head of Berkshire Hathaway had commented and explained that Bitcoin had no use case.
Two years after the statements, Buffett reported a loss of $ 49.7 billion for the first quarter of 2020. The financial giant had to admit that it was wrong about its massive investments in airlines, a sector that has suffered the most since the Fear of the coronavirus kept people away from flying.
Without highlighting one or more specific investors, Mr. Jones stated that investors should simply hold the best performing asset without getting stuck on their intellectual side. Otherwise, they would be left in the dust because they thought they were smarter than the market.
“Ultimately, the best strategy to maximize profits is to have the fastest horse,” he added.
# 3 Bitcoin not the best
Meanwhile, Mr. Jones discussed Bitcoin’s store of value properties by comparing them to traditional assets. He found that the cryptocurrency had the lowest score in terms of purchasing power, trustworthiness and liquidity. At the same time, he praised it for the best portability compared to financial assets, fiat cash and gold.
“Bitcoin had a total score [of] nearly 60% of the financial assets but has a market cap of 1/1200 of that, ”noted Mr. Jones. “It counts 66% of gold as a store of value, but has a market capitalization of 1/60 of the outstanding gold value. Something seems wrong here and I suspect it is the price of Bitcoin. “
Bitcoin score based on store-of-value items | Source: Tudor Investment Corp.
However, the hedge fund manager said Bitcoin’s market cap could boom after projects like Facebook’s Libra and China’s DCEP launched their digital currency and wallets. It would bring Bitcoin to the consciences of more people, which would ultimately improve the cryptocurrency’s purchasing power and trustworthiness.
Tudor BVI has nearly $ 22 billion worth of assets under management. Even a single-digit percentage investment could bring hundreds of dollars to the Bitcoin market.
Photo by Aaron Burden on Unsplash