$40 Billion Hedge Fund Manager Backs Bitcoin

$40 Billion Hedge Fund Manager Backs Bitcoin

almost 4 years ago2 mins

It was all quiet on the bitcoin front following a drastic price drop in March – until late last week, that is, when the world’s largest cryptocurrency won the backing of a prominent investor worried about inflation rising. With its third-ever “halving” event also due Tuesday, bitcoin is suddenly big again… 👩‍💻

What does this mean?

It’s been a particularly wild 2020 for bitcoin investors. The cryptocurrency’s price topped $10,000 in February before suddenly crashing to half that level. But it’s crept up again since – and briefly hit five digits last week on news that Paul Tudor Jones, the founder of $40 billion hedge fund Tudor Investment, viewed bitcoin as one of the best protections against what he predicted would soon become spiraling inflation.

Bitcoin’s price fell 39% on March 12th (Source: CoinMarketCap)
Bitcoin’s price fell 39% on March 12th (Source: CoinMarketCap)

Jones believes that massive central bank bond-buying and government spending unleashed in response to the coronavirus crisis represents the “Great Monetary Inflation”. Estimating that $4 trillion has been printed since February, he views a long-term, cash-eroding increase in the prices of goods and services as the inevitable result. With normal currencies approaching digitization anyway, Jones rates bitcoin unexpectedly highly as a store of value.

That’s partly due to the cryptocurrency’s built-in scarcity – and appropriately enough, bitcoin’s first halving event since 2016 is imminent. At some point on Tuesday, the pace at which its miners get rewarded (and its supply thereby increases) will fall from 12.5 to 6.25 bitcoins per block: an event many cryptocurrency fans think could spur further future price gains… 😲

Why should I care?

Jones is of the first major investment figures to publicly declare for bitcoin – and may have invested a “low-single-digit” percentage of one of his funds in the cryptocurrency. That being said, he also advocates other options:

Tudor’s ranked list of historically successful inflation-protection investments
Tudor’s ranked list of historically successful inflation-protection investments

Predictions of high inflation have been consistently proved wrong in recent years – and a coronavirus-induced collapse in demand means deflation is currently a bigger worry. Still, with government and company debt sky-high, central banks’ go-to move of raising interest rates to restrict inflation may become harder to pull off 🤔

As if investors needed any reminding of bitcoin’s volatility, the cryptocurrency’s price fell 10% in just half an hour on Saturday – unhappily coinciding with a brief blackout at Coinbase, one of the most popular trading exchanges. Some also believe the halving hype means bitcoin is set for a near-term fall – and are positioned accordingly

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