Hedge Fund Pioneer Paul Tudor Jones Turns Bullish On Bitcoin Amid ‘Unprecedented’ Monetary Inflation
Paul Tudor Jones, a pioneer of the modern hedge fund industry, is reportedly betting on bitcoin’s price as an inflation hedge. Exactly how is unclear. Hedge Fund Pioneer Turns Bullish On Bitcoin Amid ‘Unprecedented’ Monetary Inflation
Jones’ fund, Tudor Investment Corp., may hold as much as “a low single-digit percentage of its assets” in bitcoin futures, according to a report Thursday by Bloomberg News, which summarized a note sent to investors. The fund manages $38 billion.
It is not clear from Bloomberg’s summary whether Tudor’s fund has begun buying futures, what kind (physically delivered or cash-settled), on which exchange it would do so or whether it plans to also trade the underlying commodity. Reached by CoinDesk, a spokesperson for Tudor had no immediate comment.
Jones was one of the first well-known hedge fund managers, having started Tudor Investment Corporation in 1980 at the age of 25.
He made a name – and a substantial return — for himself by correctly calling the 1987 crash and then shorting Japanese equities a couple of years later just before that market collapsed.
He has since become an elder statesmen of sorts for the hedge fund world and his philanthropic endeavor, the Robin Hood Foundation, boasts finance titans and celebrities alike on its board.
Bitcoin reminds Jones of gold in the 1970s, according to the report. Through the early 1970s, gold experienced an acute rally from $35 per ounce in 1971 to a peak of $180 in late 1974.
Unprecedented central bank monetary policy amid the coronavirus crisis is a primary reason for Jones’ interest in bitcoin. What he referred to as the ongoing “Great Monetary Inflation” left him, a market veteran, speechless. It’s an “ unprecedented expansion of every form of money unlike anything the developed world has ever seen,” Jones wrote to his clients.
Jones’ statement comes amid a new all-time high in CME bitcoin futures open interest, which nearly reached $400 million on Wednesday, according to Skew. Bitcoin also rallied nearly 10% on Thursday, climbing from $9,000 to just below $9,900 at the time of publication.
A low-single-digit percentage of Tudor Investment Corp.’s assets invested in bitcoin futures would be equivalent to nearly all open interest in CME bitcoin futures contracts at the time of publication.
Amid much discussion on monetary policy in his letter, Jones inserted a subjective ranking of certain assets by their ability to store value. With 100 as the maximum and best score, Jones ranked Bitcoin at 43, the worst score relative to gold, cash, and financial assets.
Writing to his clients, Jones said, “I am not a hard-money nor a crypto nut.” But Jones sees the the most compelling argument for investing in Bitcoin as “the coming digitization of currency everywhere, accelerated by Covid-19.”
BitMEX CEO Expects Investors To Follow Paul Tudor Jones’ Move To Bitcoin
BitMEX’s CEO expects that Paul Tudor Jones will bring more big investors to the crypto market by investing in Bitcoin.
Paul Tudor Jones, a legendary hedge fund investor, triggered massive excitement in crypto markets yesterday by revealing that Bitcoin (BTC) is part of his portfolio. Traders and industry players like BitMEX’s CEO expect that the move will bring more big investors to the market.
Arthur Hayes, CEO of the world’s second largest crypto exchange, BitMEX, says that Jones has just removed career risk from investing in cryptos like Bitcoin. “Expect a lot of beta fund managers to begin cooking some copypasta,” Hayes tweeted May 7.
Jones Paves The Way For Other Hedge Fund Managers To Get Into Bitcoin
Hayes is not alone in thinking that more institutional investors will follow Jones’ method to hedge against inflation risks. On May 7, CNBC’s Bitcoin baller, Brian Kelly, or BK, and CNBC’s Fast Money traders discussed the potential impact of the billionaire investor’s Bitcoin news.
Karen Finerman, co-founder and CEO of Metropolitan Capital Advisors and a CNBC Fast Money panelist, also believes that Jones is paving the way for more hedge funds and mainstream investors to get into Bitcoin. Finerman outlined that people will feel more safe buying Bitcoin now that Jones has invested in it:
“Nobody wants to get outed having owned Bitcoin if it completely falls apart. But if you can say that Jones owns it also, maybe that gives you a little bit of cover.”
Bitcoin Has Higher Upside Than Gold, Brian Kelly Says
Jones said that Bitcoin reminds him of the crucial role that gold played in the economic crisis of the 1970s. According to CNBC’s BK, both Bitcoin and gold can do well in the current economic environment due to their common features, like a capped supply.
However, the CNBC Bitcoin analyst says that Bitcoin will play a bigger role in the current environment due its digital and mobile nature. Kelly also outlined that Bitcoin has a “much higher upside” and a better risk-to-reward.
On May 2, major United States’ crypto exchange, Coinbase, published a report arguing that the pandemic-fueled crisis will make Bitcoin superior to gold.
Bitcoin Crosses $9K As Paul Tudor Jones Confirms 1% BTC Portfolio
Bitcoin price action turns volatile once more as daily gains circle 4% despite bad news from traditional markets, which are tipped to open lower.
Bitcoin (BTC) returned to $9,000 just hours before the halving on May 11, stepping up efforts to erase the weekend’s big losses.
BTC Price Hits $9,150
Data from Cointelegraph Markets and CoinMarketCap showed BTC–USD attempting to establish $9,000 as support on Monday as traditional markets prepared to also open lower.
Having shed over $1,200 at the weekend in a move that saw some exchanges dive to just $8,250, Bitcoin then clung to around $8,800 for the rest of Sunday.
At press time, price movements were still rocky, with halving excitement contrasting with selling pressure on the Dow Jones Industrial Average, S&P 500 and elsewhere.
Paul Tudor Jones Confirms Bitcoin Holdings
Attention also focused on a CNBC interview from macro investor Paul Tudor Jones, who last week revealed that he had purchased Bitcoin. Public praise from Jones could potentially spark an uptick in mainstream consumer purchasing.
Describing cash as a “wasting asset in your hand” due to inflation, he told the network that Bitcoin represented at least 1% of his total assets and the figure could be closer to 2%.
“The dumping into a big bullish response is also what we have seen at previous bottoms,” Cointelegraph analyst filbfilb summarized to subscribers on Monday.
If the bulls can stay above $8,700 & the POC down here then things might be looking up sooner rather than later = loose that and make it resistance and then it’s bearish.
Earlier, Cointelegraph published four areas for traders to watch ahead of the halving, which could hit in a matter of hours.
The event has attracted considerably more attention than the previous halving in 2016, according to data from Google Trends, which suggests that search interest alone is 300% higher this year.
Bitcoin Eyes $9K As Billionaire VC Sees Dollar ‘Deflationary Spiral’
Smoother conditions follow Bitcoin’s third block subsidy halving on Monday, but anticipation is building as fiat continues to wane.
Bitcoin (BTC) was fighting for $9,000 support on May 12 as more public praise surfaced amid continued dismal conditions for the world economy.
BTC Price Unmoved By Halving
Data from Cointelegraph Markets and CoinMarketCap showed BTC/USD closing in on the $9,000 mark on Tuesday, having briefly clipped it the day before.
After its third block subsidy halving completed, excitement has grown over the next price move for Bitcoin, which lost $1,200 in the run-up to the event at the weekend.
Palihapitiya warns on “massive deflationary spiral”
Earlier on Tuesday, the chairman of Virgin Galactic called Bitcoin the most “uncorrelated” asset to fiat markets as the U.S. dollar faces a “massive deflationary spiral.”
Speaking to CNBC’s Squawk Box, Chamath Palihapitiya did not mince his words when it came to the biggest cryptocurrency’s superiority.
“When we started to believe in the long-term value of Bitcoin, it was as a store of value and it was that schmuck insurance that you kept under the mattress,” he told the network.
CNBC referenced Monday’s interview with investment giant Paul Tudor Jones, who revealed on air that he now kept between 1% and 2% of his total assets in BTC.
“The reason is because now we are in this massive deflationary spiral, and you have to figure out how you’re going to protect yourself,” Palihapitiya continued.
And so however you think about it — from classic economic theory or the schmuck insurance or you’re somewhat skeptical of the established government masses — it is important that we have a hedge, a non-correlated hedge. And I still struggle to find anything that is as uncorrelated to anything else and to everything else than Bitcoin.
Anthony Pompliano Says Gov’t Response To COVID-19 Will Drive Crypto Adoption
Anthony Pompliano argued that government stimulus measures will drive the adoption of alternative stores of value and non-correlated assets at Consensus.
Anthony “Pomp” Pompliano, the co-founder of Morgan Creek Digital, argued that the United States government’s response to the COVID-19 lockdown will drive new users to adopt cryptocurrencies.
During a discussion with Binance CEO Changpeng Zhao at Consensus: Distributed on May 12, Pomp argued that the uncertainty and fear surrounding the monetary policies introduced to stem the impacts of the economic slowdown will drive ordinary people to seek out hedges against inflation and alternative stores of value.
Stimulus Will Up Demand For Alternative Assets
When asked if the coronavirus pandemic is driving more people toward cryptocurrencies, Pompliano stated, “I don’t know if COVID-19 necessarily does, I think the response to COVID-19 probably does that you’re gonna see central banks around the world print trillions of dollars.”
“The fear of inflation, whether it actually happens or not, will drive people to, one — seek out something like a Bitcoin that is an inflation hedge, and two — as currencies fail, people will look for [what’s] able to store value or move value easier,” he continued.
“As we see in places like Lebanon, etc. — where there’s just a lot of capital controls and kind of nefarious behavior from banks and governments — I think people will seek out assets that only require an internet connection to be able to transact, so that is super bullish for Bitcoin and crypto in general.”
Bailouts Are Creating “Perfect Storm” For Crypto
Zhao also emphasized the implications of bailing out large companies deemed “too big to fail” amid the recession, stating:
“Any company that requires a bailout is basically mismanaged by definition, and those long-term impacts are severe. So who is going to bail out the government? If you are a fund and you start investing in a lot of failed companies, the fund is not going to do well.”
“Those longer-term impacts are actually very painful and very impactful,” he said, stating, “They don’t show up on the second day, but when they do slowly show up — those impacts are huge.”
“I think, as many people say, this is the perfect storm for cryptocurrency,” Zhao added.
Institutional Interest In Bitcoin To Keep Rising After BTC Halving
Institutions continue to show interest in Bitcoin and digital assets amid the third Bitcoin halving, data shows.
Having recently gone through the third halving, one of the most important events in the ecosystem, Bitcoin (BTC) continues to establish itself as a new asset class and a worthy contender to gold as a new store of value for the digital age. Having seen a dip in price from the $10,000 levels to $8,500 just a few days before the halving, the Bitcoin price has remained below $10,000 even after the event.
Seeing its production cut in half in a matter of seconds, Bitcoin’s scarcity and low stock-to-flow ratio makes it an attractive investment for those looking to shield themselves from the inflation associated with fiat currencies and from political instability. Institutions seem to be no different, as regulated Bitcoin derivatives volumes started to post growing numbers in the midst of the halving.
The Chicago Mercantile Exchange’s volume for Bitcoin options reached an all-time high on May 11, at over $15 million, and has since been growing, reaching $40 million on May 13, according to data from Skew. The BTC futures market also recorded high volumes, reaching a three-month high on May 11 and registering just over $900 million worth of contracts exchanged for the day.
Institutional Interest Leading Up To The Halving
According to data by CryptoCompare, CME Bitcoin derivatives products have seen declining interest since the Bitcoin price crashed on March 12 and March 13, decreasing a further 11.1% to $4.5 billion exchanged in April. The recent volume spike could signal a change in the trend for CME Bitcoin products.
CME Bitcoin derivatives data is just one of the many metrics through which institutional interest for Bitcoin and digital assets can be observed, and everything seems to point toward a growing interest from institutional players.
On May 8, just a few days before the halving, 3iQ Corp announced the completion of a $48 million offering of its Bitcoin Fund, which recently began trading on the Toronto Stock Exchange, or TSX, relying on custodian services by Gemini and index services from VanEck’s MVIS and CryptoCompare. The Bitcoin Fund is the first public Bitcoin fund listed on a major global stock exchange, as noted by Tyler Winklevoss.
Another piece of data pointing toward growing institutional interest is Grayscale’s recent Q1 report. The world’s largest digital currency asset manager posted record-breaking numbers in terms of capital inflow to its GBTC product, which currently holds 1.7% of the total BTC in circulation. Grayscale’s crypto funds brought in over $500 million in Q1, the majority of which comes from institutional players.
Rayhaneh Sharif-Askary, Grayscale’s head of investor relations, recently told Cointelegraph, “Our recent conversations with investors reinforce the idea that now, more than ever, investors are going to be looking for ways to build resilient portfolios.”
In April, Fidelity Digital Assets, the cryptocurrency services division of Fidelity Investments, confirmed that it has seen an increased interest in digital assets. As Bitcoin continues to establish itself as a store-of-value asset, the “digital gold” narrative seems to resonate with more clients, Fidelity Digital Assets observed. An increased interest from pension funds and family offices has also been noted.
Institutional Investors Reassured
This “digital gold” classification is becoming increasingly important for Bitcoin as it continues to carve its identity among other assets. What was once looked as a rebellious attempt to overthrow fiat currencies and central banks is possibly turning into a level-headed investment asset class.
Just last week, the veteran hedge fund manager Paul Tudor Jones showed his appreciation for Bitcoin, stating that it reminds him of gold in the 1970s and that the digital asset may be the best hedge against growing inflation brought about by the coronavirus pandemic. The well-known manager estimates that around 1%–2% of his assets are held in Bitcoin.
Endorsements from respected figures like Paul Tudor Jones can also have a big impact on how fast other institutions jump on board the Bitcoin or digital asset wagon. Matt D’Souza, CEO of Blockware Mining and hedge fund manager, told Cointelegraph just how important the recent nod was:
“Paul Tudor Jones is the first domino to fall. Most Traditional finance and fund managers are followers. They will follow Paul Tudor Jones. Most managers don’t want to be the first but now they have to strongly consider bitcoin to assure they’re competitive.”
BitMEX CEO, Arthur Hayes, has also noted the importance of the endorsement from a figure like Paul Tudor Jones, stating that he expects a lot of “beta fund managers to begin cooking some copypasta.” Karen Finerman, co-founder and CEO of Metropolitan Capital Advisors and a CNBC Fast Money panelist, likewise believes this is a positive development:
“Nobody wants to get outed having owned Bitcoin if it completely falls apart. But if you can say that Jones owns it also, maybe that gives you a little bit of cover.”
More Than Just Hype?
Although it is becoming clear that institutional demand for Bitcoin is beginning to grow, investing in such a novel asset can be tricky for these corporations. With new, regulated options such as the aforementioned TSX-traded Bitcoin close-ended fund, this interest is being met, which allows institutional investors to begin dipping their toes in the Bitcoin market.
For example, Renaissance Technologies’ Medallion Fund — a hedge fund with $10 billion worth of assets under management — recently received approval from the United States Securities and Exchange Commission to offer CME-regulated Bitcoin futures products and services to its clients.
Bitcoin’s new-found attractiveness in the eyes of institutional investors goes way beyond the hype that motivates retail investors. A recent study by Bitwise shows that having a small percentage of holdings in Bitcoin in an institutional portfolio can be extremely profitable.
The report shows that, even if bought at its highest point, a Bitcoin allocation made in 2014 would have contributed positively to a portfolio’s returns (assuming quarterly rebalancing) due to Bitcoin’s unique return profile, which combines significant volatility and a lack of correlation with other assets.
A similar study was published by United Kingdom-based digital asset hedge fund Ecstatus Capital in April this year.
The paper analyzed the impact of adding different allocations of Bitcoin to traditional portfolios over the five-year period from January 2015 through January 2020. Ecstatus’ study showed the potential diversification benefits that can be found with some exposure to Bitcoin using monthly rebalancing as opposed to quarterly.
Both studies highlight the importance of portfolio rebalancing when owning Bitcoin as part of a broader portfolio made up of a collection of other assets, as rebalancing effectively forces investors to buy low and sell high.
According to a planned strategy, rebalancing a portfolio is reset back to its target weights when the investor sells a portion of the assets that did well over the period and buys more of the assets that did worse. The long-term effect of rebalancing is perhaps best summarized in a phrase coined by John Nersesian, head of advisor education at Pimco Asset Management: “Rebalancing doesn’t work every time, it works over time.”
Brace For Institutional Boom
While predicting Bitcoin’s next move is almost impossible, the road ahead seems bright for Bitcoin as institutions begin to slowly thread it. While institutional interest has been present for a while, it is now beginning to materialize and may even be accelerated by Paul Tudor Jones’ endorsement.
As institutions continue to eye Bitcoin, 2020 may finally be the year we see a Bitcoin Exchange-Traded Fund hit the market, a factor that will surely influence institutions’ perception and interest in Bitcoin.
Bitcoin Is Now The Macro Big Bet
The bull case for bitcoin as a store of value is simple: at first nobody owns it. Then it’s owned by people who are some combination of crazy and smart, but generally crazier than they are smart. Over time the craziness requirement drops, more investors buy it and it becomes dumb not to own a little.
Since existing monetary systems are necessarily optimized for the status quo – and the dollar is, in fact, very well optimized for a globalized world with a hegemonic United States – an alternative system like bitcoin is necessarily a bet on a weirder world.
We certainly live in a weird world today.
And some sophisticated money managers are taking notice.
Paul Tudor Jones II, a well-regarded global macro investor, made headlines last week when he announced he’d bought bitcoin and planned to invest up to a single-digit percentage of his net worth in the currency.
PTJ is not exactly a nose-ringed millennial day trading on Robinhood. He’s been running his fund since 1980 and has accumulated almost $40 billion in assets under management.
Jones is best known as a global macro investor, placing bets on interest rates, currencies and commodities. He founded his firm at the beginning of a golden age of macro investing, as the world worked through the implications of the collapse of the Bretton Woods system, volatility in oil and the rise of Japan.
In one five-year period, Jones’ worst annual return was 99.2%. But since the heady days of the 1970s and 1980s, macro has gotten more challenging, and the pace has slowed. Aggressive traders used to be a powerful force (in the mid-1990s, U.S.
President Bill Clinton was shocked by how powerful funds were, exclaiming to an adviser: “You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of f—ing bond traders?”)
Since then, several things have changed. Central banks have gotten more powerful because declining inflation gave them more flexibility to raise and lower rates to stimulate growth, and their perceived success in averting crises gave them a broader mandate.
Meanwhile, the macro market has gotten more competitive: There are more pure macro funds, and the banks and businesses that took the other side of their trades have gotten more sophisticated. Today, macro funds try to eke out modest gains instead of betting on the rise and fall of nations.
“The endgame for Bitcoin as a reserve asset is that it has a place on central banks’ balance sheets, like gold and the Swiss Franc.”
But their trading style remains intact. Paul Tudor Jones’ approach is well documented in interviews, including the classic documentary Trader. Jones’ approach boils down to two things: understanding fundamentals and believing prices. A purist might focus entirely on building the fundamental argument for why a given asset is a good purchase – looking at a company’s earnings growth and competitive position, or judging a currency based on its government’s fiscal and monetary policy.
A pure speculator typically makes decisions entirely based on price action, ignoring the underlying reason. Jones’ approach synthesizes these: He assumes prices move for a reason, and that if you understand the reason you can accurately predict the rest of the move.
In bitcoin’s case, Jones starts with the premise that the money supply has massively increased but the supply of goods and services has declined. As he put it in his investment memo: “A large demand shortfall will prevent goods and services inflation from rising in the short term. The question is whether that will be the case in the long term with a central bank whose central focus will be repairing the worst employment crisis since the Great Depression.” (Emphasis added.)
If demand can’t meet supply – there’s money in your pocket but you can’t take a vacation or go out to a fancy dinner – the money still has to go somewhere. In most recessions, that money finds its way into savings accounts (in 2007, the average savings rate as a percentage of disposable income was 3.7%.
By 2012, it had more than doubled to 8.8%). But savers are rational, and when rates are low they’ll look for somewhere else to put their money. Jones considers several vehicles for savings: stocks and bonds, cash, gold, and bitcoin.
He ranks them according to criteria such as trustworthiness, liquidity, purchasing power and portability. He concludes that, based on those criteria, bitcoin is fundamentally the least desirable of all the savings vehicles, just based on its intrinsic traits.
But that’s a value judgment; the other question is price. And on price, bitcoin is the winner; its value is under 2% of gold’s and less than 0.1% of the value of all financial assets.
So after careful due diligence, the famous trend-chasing macro investor ultimately treated bitcoin as a value play.
That’s not as crazy as it sounds. Currencies are always odd assets because their value is a self-fulfilling prophecy: A dollar is worth a dollar because people treat it as being worth a dollar, and people treat it as being worth a dollar because other people do.
This makes every currency by its nature a slow-motion momentum trade (with a vicious unwind when the country loses control of its currency). On most of the traits that matter for currencies – stability and liquidity – bitcoin scores poorly. But the higher its value, the better it looks.
Since a working currency is a slow-motion speculation and a new cryptocurrency is a hyperactive speculative asset, it makes sense to think of the progress a currency makes as a process of rising in value and slowing down in volatility. And one way that happens – the way it has to happen – is that larger speculators with slightly longer time horizons accumulate positions.
The endgame for bitcoin as a reserve asset is that it has a place on central banks’ balance sheets, like gold and the Swiss franc: In case of emergency, break open the cold wallet. And the intermediaries in that process are institutional investors.
Part of the way macro funds work is by keeping close tabs on the economy, and that means talking to academics and policymakers. Depending on your outlook this is either reasonable behavior – politicians consulting with relevant subject matter experts on complex topics – or it’s a conspiracy in which speculators make trades and then lean on the government to make those trades profitable.
It’s probably a bit of both: Traders do have good information and can spend all of their time mentally stress testing an investment thesis. But they also have a strong incentive to talk their book.
A macro fund with a bitcoin position is one step closer to a central bank with the same kind of position. And while Jones’ $40 billion under management certainly sounds like a lot of money, it’s a tiny amount compared to central bank balance sheets.
It’s important not to get too fixated on any one trader, of course. Jones says he actually owned bitcoin personally back in 2017 when he played the bubble and sold out near the top. “It is amazing how well one can trade when there is no leverage, no performance pressure and no greed to intrude upon rational reflection!
When it doesn’t count, we are all geniuses,” he says. (That’s right: 2020 is so weird you just learned a billionaire hedge fund manager is jealous of your trading opportunities.) Given short-term performance requirements and high leverage, a hedge fund is a naturally weak hand in the market.
But it’s a good sign that more funds are looking at, and acting on, the bitcoin opportunity. As Jones puts it in his letter to investors: “Something appears wrong here and my guess is it is the price of bitcoin.” He closes more ominously: “One thing is for sure, these are going to be incredibly interesting times.” Indeed.
Paul Tudor Jones’ Bitcoin Investments “Not A Surprise” Former Soros Adviser Says.
Takeshi Fujimaki, a former adviser to George Soros, said it was “not a surprise” to hear Paul Tudor Jones’ bitcoin revelation.
When macro investor Paul Tudor Jones, or PTJ, confirmed he was investing in Bitcoin, it sparked an uptick for the whole crypto market. Many crypto traders welcomed his surprise move, noting it was a change of the tide in the traditional sector.
Speaking at Cointelegraph Japan’s Traders Live on June 9th, Takeshi Fujimaki, a former adviser to George Soros, said it was “not a surprise” to hear Jones’ revelation, given the current state of central bank-driven monetary inflation.
Fujimaki is a former Japanese lawmaker and known as “Kuroda foe” for his criticism of Bank of Japan Governor, Haruhiko Kuroda. When he was a trader, he was in close contact with PTJ. Fujimaki revealed:
“Louis Bacon, George Soros, Paul Tudor, Julian Rovertson…I often talked to them on the phone, met them in person and discussed many things, those folks have similar mentality. They look at the long term and capture a big trend. Paul Tudor’s joining the world of crypto assets means he takes inflation concerns in the world seriously and believes crypto asset thrives in such circumstance”
Fujimaki explains when central banks flood the market with new money, there is a question of where it all will go.
He added “I do think it is quite natural to move money into cryptocurrency and bitcoin, ‘digital gold'”.
PTJ, the founder of Tudor Investment Corporation, revealed that bitcoin was part of his portfolio last month. He pointed out “The Great Monetary Inflation” as the reason for purchasing bitcoin and argued that bitcoin could be a hedge against inflation. “Bitcoin reminds me of gold when I first got into the business in 1976″ he added.
Paul Tudor Jones To Be Biggest Bitcoin Holder In 2 Years — Max Keiser
Outspoken Bitcoin investor and host of the Keiser Report, Max Keiser, explains that his $400K BTC price prediction will coincide with the U.S. dollar’s collapse.
Cointelegraph Markets spoke with Wall Street veteran and host of the Keiser Report, Max Keiser, who explains the increasingly important role of Bitcoin in geopolitics amid potential “hash wars” and why he believes Paul Tudor Jones will become the biggest holder of BTC within two years.
Your 200K+ follower Twitter account @maxkeiser went silent for a few months. What happened?
Max Keiser: It was a software bug that froze the account for nine months. I believe it was a database contention problem. My friends at SwanBitcoin took on the challenge and sorted it out. I also sent two-dozen roses and a box of chocolates to Twitter HQ in SF, but I’m not sure that had any impact.
The United States’ national debt is now over 26 trillion. Is there a certain level at which the U.S. can default?
Max Keiser: The debt is big. But the interest on that debt is now bigger than America’s number-one budget item, the military’s 1.6 trillion spend. When the interest on the debt gets close to 100% of GDP then America will officially be a failed state. This looks like it will be the case within 5 years — as short interest rates snap back to historic levels of 5%, not the current 1/2%
Post-halving, Bitcoin’s inflation rate is now less than 2% akin to gold or the Fed’s inflation target. Is this do or die for Bitcoin now as a store-of-value?
Max Keiser: Let’s be clear, Bitcoin exhibits quantum mechanical characteristics pertaining to outcomes changing depending on observation. Per the Heisenberg Principle, the observer’s act of observing changes outcomes.
In Bitcoin’s case, it’s Bitcoin that’s observing us. As I’ve argued before, starting at around block 300,000, I started noticing that Bitcoin was becoming self-aware. This has grown exponentially to a state of meta-awareness and so instead of asking is it time for Bitcoin to prove itself we should be asking ourselves, what do we have to do as a species to prove we are worthy of Bitcoin. This is why my Bitcoin VC fund is called Heisenberg Capital. As an aside, it’s outperformed every fund globally since inception in 2013 to today.
Will U.S.-China tensions and other geopolitical risks continue to put pressure on risk-on assets, and possibly affect Bitcoin?
Max Keiser: China, America, Russia and Iran will enter a Hash War to try and grab as much Bitcoin as possible. Iran is already mining Bitcoin. I believe they have 3% of the hash rate. This is another “Sputnik moment” where America has to decide if they want to win the Hash War or get relegated to the dustbin of history.
Do you agree that Paul Tudor Jones announcing his Bitcoin exposure is a major green-light for traditional investors? Is this a watershed moment? If not, what will it be?
Max Keiser: I think PTJ, who I followed closely when I was a stockbroker on Wall St. from 1983-1990, will be the biggest HODL’er of Bitcoin within 2 years. He is an absolute mercenary if he sees something he likes.
“The Bitcoin community has never seen the likes of PTJ and will be shocked by his take no prisoners audacity.”
You recently said that basic consumer protection is appropriate in the case of the Bitcoin Cash fraud. Can you elaborate on this?
Max Keiser: None of the hard forks and none of the altcoins will attract enough energy to survive. It’s a winner take all game and Bitcoin is not only starving alts of energy but also starving fiat money and their sponsoring nation-states of energy.
Bitcoin is an indestructible Godzilla with an insatiable appetite for energy that is transforming the world and everything that lives. Regulators should warn people about failed projects like BCH, but the more likely scenario is that both BCH and the regulators go bankrupt due to a Bitcoin evisceration.
You have also been vocal about Ethereum criticizing Vitalik Buterin for failing to understand Bitcoin’s value proposition. What does he get wrong about Bitcoin?
When I was chatting with Vitalik in London, he was still working at Bitcoin Magazine at the time, and just planning ETH. He didn’t get how absolute scarcity drives the BTC market. He still doesn’t get it.
He’s repeatedly downplayed absolute scarcity. So, I never believed he really understood how BTC works. Funny, because the problems ETH has is that it’s a centralized, variable supply fiat-substitute that has all the problems of fiat money.
“Ironically, ETH is trying to be fiat money and failing.”
So I take it you’re not a fan of Ethereum 2.0 and its roadmap?
Max Keiser: It’s a Rube Goldberg machine to nowhere.
You’ve recently spoken with Bitcoin & Black America author Isaiah Jackson on your show. Why is this book so significant and timely right now with the current social unrest in the U.S.? How does Bitcoin help blacks in America?
Max Keiser: Bitcoin helps the biggest victims of fiat money the most. America’s Black community is the biggest victims of America’s fiat money so they potentially are the biggest winners as Bitcoin pushes out fiat and becomes the global reserve currency. I said on Keiser Report back when BTC was $1 that America’s Black community should buy up all the BTC they can and then they could buy the White community if they chose to.
Major banks are now changing their tune about Bitcoin, most notably JPM. Why do you think this is the case, and will this be a continuing trend?
Max Keiser: You don’t change Bitcoin, Bitcoin changes you — per the Heisenberg Principle effect — and the existence of a self-aware Bitcoin. With this in mind, I helped direct BTC’s attention to Jamie Dimon and JP Morgan by effectively “painting the target.” The protocol cracked that nut and now Jamie’s a BTC drone. The same thing is happening to Peter Schiff.
Do you see the stock market hitting new all-time highs this year? What does this mean for Bitcoin? Your Bitcoin price target by 2021?
Max Keiser: The U.S. stock market will probably hit new highs just like the markets hit new highs in Venezuela, Zimbabwe and Iran. Not because companies are doing well but because the currencies are collapsing.
“My target for BTC since 2011 has been $100,000 and I recently upped that to $400,000. The timing depends on when exactly the $USD collapses.”
It could happen any day. Better to be a few months early than a day late. When the dollar cracks, BTC price gaps higher by $10,000 at a clip. If you’re not already positioned, you’ll be eating dirt.
Paul Tudor Jones Bitcoin Fractal Hints At Possible Explosive BTC Rally
A fractal from Paul Tudor Jones hints that Bitcoin price is in an early stage, long-term rally like gold was in the 1970s.
Based on the fractal, Bitcoin is in an early phase of a prolonged rally that could allow BTC to experience exponential growth in the longer term.
Bitcoin May Be On The Same Trajectory As Gold
There are two main reasons why Bitcoin could follow the macro trend gold saw from the 1970s. First, BTC has a fixed supply that cannot expand, which makes it an attractive hedge against inflation. Second, BTC has the same qualities of a safe-haven asset that gold has.
In August 2020, the Winklevoss twins, billionaire Bitcoin investors behind the major U.S. cryptocurrency exchange Gemini, laid out a bull case for why BTC price could rally to $500,000.
In the thesis, they identified the qualities of Bitcoin that make it a viable safe-haven asset. The Winklevoss specifically emphasized that BTC is not subject to any potential supply shocks, unlike gold. They wrote:
“Supply. Bitcoin is not just a scarce commodity, it’s the only known commodity in the universe that has a deterministic and fixed supply. As a result, bitcoin is not subject to any of the potential positive supply shocks that gold (or any commodity for that matter) may face in the future.”
Due to this characteristic of Bitcoin, investors continuously make the argument that BTC makes a better safe-haven asset than gold. This comparison between BTC and gold is what leads many to believe that Bitcoin is on a trajectory for long-term exponential growth.
Su Zhu, the CEO of Three Arrows Capital, one of the largest funds in the cryptocurrency space, said
“Any continued dump in $BTC would be extremely bullish as it would reveal we are following the gold fractal from the 1970s, as per below by Paul Tudor Jones–the legendary macro investor who successfully used fractals to predict the 1980s stock market supercycle.”
There is also a massive gap between the valuation of Bitcoin and gold. Currently, gold’s market cap is estimated to be $9 trillion. In comparison, Bitcoin’s market cap is less than 4% of gold’s valuation, which leaves a gap between the two assets.
Bitcoin Is The ‘Wrong Price For The Possibilities It Has,’ Says Paul Tudor Jones
He says “The path forward from here is north.”
In a Thursday interview with Yahoo Finance’s Julia LaRoche, Jones outlined his vision of the digital currency market over the next several decades.
“I’m Not An Expert On Bitcoin By Any Stretch,” Jones Said, Adding:
“With a market cap of $500 billion, it’s the wrong market cap in a world where you got $90 trillion worth of equity market cap and God knows how many trillions of fiat currency.”
Jones was referring to the notion that Bitcoin’s market capitalization, which is currently at $358 billion, is too small relative to its use case and future value drivers. He continued:
“Bitcoin reminds me so much of the internet stocks of 1999 because the internet was in its infancy. No one knew how to value it because of the world of possibility that lay ahead.”
Jones expects that everyone, including sovereign nations, will be using “some type of digital currency” over the next 20 years.
By that time, the digital currency market will be a lot like the “metals complex” of today, where you have “precious crypto” like Bitcoin assuming the role of gold and transactional cryptos serving the function of industrial metals like copper and aluminum.
Jones came out publicly in favor of Bitcoin in May when he described the asset as the “fastest horse in the race” against inflation. Just last week, he introduced a fractal model based on gold’s trajectory in the 1970s to predict an explosive price rally for BTC next year.
2020 could go down as the year where institutions permanently altered the trajectory of Bitcoin. Institutional fingerprints are all over the alarming Bitcoin shortage that is driving prices higher, as corporations and large-scale investors scoop up all of the 900 BTC being mined each day.
Crypto assets will officially hit Wall Street data feeds in 2021, allowing investors to monitor minute-by-minute price movements. S&P Dow Jones Indices announced Thursday it will soon debut cryptocurrency indexes on more than 550 of the top traded coins.
The ‘Inhospitable To Capitalism’ US Can Target Those Ditching Dollar For Bitcoin — Ray Dalio
Investors should reduce dollar exposure, the billionaire says, as MicroStrategy’s Michael Saylor describes Bitcoin as the “obvious solution.”
The United States and other countries could “impose prohibitions” on Bitcoin (BTC) as part of “shocking” tax changes, investor Ray Dalio has warned.
In his latest article on LinkedIn, Dalio — a recent convert to Bitcoin as an investment opportunity — laid out a stark future for U.S. investors.
Dalio: Prepare For “Shocking” Tax Changes
With the onset of the coronavirus pandemic, bonds have become all but redundant for preserving wealth. In an attempt to claw back some of the huge amounts of debt created as its response, the U.S. government plans to raise taxes — and the impact could be much worse than many realize.
This, Dalio thinks, will become a “new paradigm.”
“If history and logic are to be a guide, policy makers who are short of money will raise taxes and won’t like these capital movements out of debt assets and into other storehold of wealth assets and other tax domains so they could very well impose prohibitions against capital movements to other assets (e.g., gold, Bitcoin, etc.) and other locations,” he summarized.
“These tax changes could be more shocking than expected.”
As a result, the environment for those with savings will end up feeling less attractive than ever.
The United States is becoming “inhospitable to capitalism,” Dalio said — and to guard against the consequences, investors should embrace a “well-diversified portfolio of non-debt and non-dollar assets along with a short cash position.”
Saylor Taps Bitcoin As “Obvious Solution”
Responding, however, MicroStrategy CEO Michael Saylor said that Bitcoin is the answer.
“I agree with (Dalio) that bonds no longer work as a treasury asset,” he wrote on Twitter.
“Respectfully, Bitcoin is the obvious solution, and much more practical than ‘a well-diversified portfolio of non-debt and non-dollar assets’ in ‘Asian emerging…markets.’”
MicroStrategy continues to add to its BTC position, revealing last week a purchase of 260 BTC for $15 million. In total, the company holds 91,064 BTC.
Dalio himself has changed his position markedly on Bitcoin, admitting that his misgivings were based on a lack of knowledge about how the cryptocurrency works.
His perspective chimes with that of Arthur Hayes, former CEO of derivatives giant BitMEX, who in a post of his own told investors to go long on cryptocurrency and interest rate volatility.
“I also believe that one should be mindful of tax changes and the possibility of capital controls,” Dalio concluded.
Paul Tudor Jones Could Go ‘All In’ on Inflation Trades, Wants 5% Bitcoin Allocation
Jones sees BTC as a great way to protect wealth over the long run.
Hedge fund manager Paul Tudor Jones told CNBC on Monday he would “go all in on the inflation trades” if the U.S. Federal Reserve remains indifferent to rising consumer prices.
The hedge fund manager discussed the potential implications of Fed Chair Jerome Powell’s insistence on characterizing the recent acceleration in inflation to the fastest in 13 years as “transitory.”
The U.S. central bank’s monetary policy committee meets this week in a two-day, closed-door session to evaluate the latest economic figures, with a statement expected Wednesday followed by a press conference with Powell. Jones said he will be paying close attention.
“If they treat them with nonchalance, I think it’s just a green light to bet heavily on every inflation trade,” Jones said during a CNBC Squawk Box interview, referring to economic indicators.
“If they say, ‘We’re on [the] path, things are good,’ then I would just go all in on the inflation trades,” Jones said. “I’d probably buy commodities, buy crypto, buy gold.”
Jones said he likes bitcoin and sees it as a great way to protect wealth over the long run. He holds it in his portfolio, comparing it to gold.
In May, Jones bet 1% to 2% of his assets on bitcoin. His firm, the $44.6 billion Tudor Investment Corporation, most recently secured custodial ties with institutional powerhouses Coinbase and Bakkt.
Jones told CNBC Monday he wants an allocation to bitcoin of 5%.
“The only thing that I know for certain is I want to have 5% in gold, 5% in bitcoin, 5% in cash, 5% in commodities,” said Jones.
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