Why Paul Tudor Jones Sees a Bright Future for Bitcoin

To trend-spotting hedgie, the cryptocurrency is ‘the fastest horse,’ so he buys its futures.

Bitcoin is getting downright respectable. Now it can boast an endorsement from Paul Tudor Jones, who has a pretty decent rep of predicting investing and economic trends.

Jones becomes the first big-name hedge fund manager to invest in the cryptocurrency, which has long been the object of disdain among mainstream Wall Streeters. They term it as a haven for drug dealers and other unsavory souls, because its blockchain technology can make it easy to mask people involved in transactions.

“The best profit-maximizing strategy is to own the fastest horse,” wrote Jones, the founder and CEO of Tudor Investment, in a note to clients. “If I am forced to forecast, my bet is it will be Bitcoin.”

Jones titled his piece “The Great Monetary Inflation,” by which he means there will be an expansion in forms of money up ahead, not necessarily price inflation. As a store of value, he still ranks Bitcoin behind financial assets (No. 1), cash, and gold. Amid the current economic turmoil, however, Jones believes that Bitcoin will play “a growing role.”

And up to a point, Jones is putting his money where his mouth is. He indicated that his Tudor BVI fund is allocating a low single-digit percentage of its assets in Bitcoin futures. His hedge operation is of the macro persuasion, which means it seeks to ride major trends it spots worldwide, particularly in interest rates and currencies. So Bitcoin is in Jones’ sweet spot.

Jones himself is well-known as a forecaster: He predicted the Black Monday stock market crash in 1987 and made a pile by shorting equities. His strong performance has ebbed somewhat lately, though, and he has suffered some investor redemptions. Tudor has an estimated $7.5 billion under management. An attempt to reach him for comment wasn’t immediately successful.

To be sure, the Bitcoin market is a volatile one, not for the faint of heart. The cryptocurrency reached an all-time high of $19,800 in 2018, tumbled to $3,952 at the end of that year, and climbed back to $12,024 in 2019. In March, Bitcoin went into another freefall as stocks tanked worldwide. It bottomed out at $5,672, as Washington help for the capital markets was announced, and rose anew to $9,826 Thursday, according to Coindesk.

Bitcoin has gradually gained greater acceptance. In 2017, Jamie Dimon, CEO of JPMorgan Chase publicly denounced the virtual currency as a fraud. And he went on to say: “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed. … It’s just not a real thing, eventually it will be closed.”

Well, times have changed. JPM has accepted two well-known Bitcoin exchanges, Coinbase and Gemini Trust, as banking customers. Dimon later said he regretted his remarks about Bitcoin.

Meanwhile, Bitcoin futures now trade on the CME Group’s floor, where trading volume has jumped more than 40% from a year ago, the exchange said. Some 850 new accounts have opened in 2020, more than twice the pace of this time last year.

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