Billionaire hedge fund manager, Paul Tudor Jones recently announced that he’s betting on Bitcoin to hedge against inflation. Jones has taken a position in Bitcoin through his $40 billion hedge fund, buying Bitcoin futures on CME. Jones is known for trading everything from currencies to commodities, but he is famous for successfully navigating the stock market crash in 1987. Black Monday, as it’s commonly known, was a severe and unexpected stock market crash that struck the global financial market system, with Dow Jones losing almost 23% in a single day. Almost no one saw this coming, except for Paul Tudor Jones. Jones thinks that Bitcoin will be the biggest winner, as a result of the Federal Reserve’s current monetary policy. Since February, about 3.9 trillion dollars, the equivalent of 6.6 percent of global economic output has been printed. That’s insane, when you think about it. I could agree more with Jones. If you’re gonna ride in the Kentucky Derby, you don’t leave your prize stallion in the stable.
Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.
A few days ago, in an investor letter entitled “The Great Monetary Inflation”, Jones wrote, “Bitcoin reminds me of gold, when I first got into the business in 1976.” In the case of rising inflation, Jones continued, “the best profit-maximizing strategy is to own the fastest horse … if I am forced to forecast, my bet is it will be Bitcoin.”
Jones ranked Bitcoin as the worst store of value, when compared to other financial assets, cash and gold, but he noted some of its superior characteristics. Its fixed supply and ease of exchange.
Paul Tudor Jones subjectively ranks bitcoin as the worst store of value relative to cash, gold, and financial assets. pic.twitter.com/wGXtSG2yG6
— Zack Voell (@zackvoell) May 7, 2020
Researching gold’s performance in the 1970s, we’ll see that it rose from $35 an ounce in 1971 to $180 dollars by 1974, a four 414 percent gain. After a correction in 1976, falling nearly 40% to a $110, it recovered to the previous high by 1978 and in 1980 the price of gold reached $850. In less than ten years, gold went from $35 to $850 per ounce.
If Bitcoin reminds Paul Tudor Jones of gold, we in for quite a ride.
Earlier last week, Bitcoin’s price peaked over $10,000, up +38% from the beginning of the year. Since early March, its price has more than doubled, as investors gear up for the upcoming halving on May 12, 2020, that will slash the reward miners receive for verifying new cryptocurrency transactions. At this price, Bitcoin’s total market capitalization stands at over $180 billion, 67.8% of the total cryptocurrency market.
When stacked up against gold or Wall Street, Bitcoin is the best performing asset of 2020. Bitcoin futures have gained nearly 38% in the year to date and almost 70% over the past 12 months, outperforming gold by a huge margin. That’s a pretty good reason to think of Bitcoin as the fastest horse in the race. And it looks like Paul Tudor Jones is not the only one that think this way. CME data suggests that other big players, just like Jones, are getting in position to gain long-term exposure to Bitcoin.
If you main goal is to make as much money as possible, then it’s better to bet on something with the highest probability of a massive return. That’s Bitcoin, not gold.
With the FED printing so much money, the dollar’s value is going down. While we’re not going to feel the impact right away, you can be sure it will be coming in the next two to three years. As we start to feel the loss of our purchasing power and the confidence crisis hits fiat currencies, more and more people will start looking for alternatives.
Naturally people will turn to precious metals, like gold and silver, as they have done so many times in the past. This environment is going to be very good for the price of gold. But there is also a high chance that people will start using Bitcoin as money, instead of fiat currency.
Gold is a great store of value with a long history, but its purchasing power doesn’t really change over time. On the other hand, if people move to something like Bitcoin, the purchasing power per Bitcoin is going to skyrocket.
What Paul Tudor Jones is really betting on is the risk reward ratio. Yes, there’s a higher risk that you could lose everything you put into Bitcoin because it’s less proven, less tested and there’s not much history behind it. But if it takes off, the rewards will be immense, compared something like gold.
Paul Tudor Jones is no newcomer to Bitcoin. In the last big bull run of 2017, right before it peaked at around $20,000, Jones got out of his position and reportedly doubled the money that he invested in Bitcoin.
The most compelling argument for owning Bitcoin right now, is the coming digitization of currency, accelerated by Covid-19. There is still a lot of opportunity for growth in the market for Bitcoin, to go higher. It is going to get a lot easier for everyday people to use cryptocurrencies. It’s going to be easier for big companies and countries to use cryptocurrencies, as well. They’re already seeing the efficiency, speed and safety that crypto provides.
We are moving to a digital currency world. If the price of Bitcoin starts to rise rapidly, doubling, tripling, quadrupling or hitting 10x or 100x, it will most likely happen because new users start to adopt it, and not necessarily, because the dollar is losing its value.
Secretariat was the fastest horse to run the Derby. His power came from within. Horses never run faster over every quarter, for a mile and a half. Secretariat did. So will Bitcoin.
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