There has always been a lot of apprehension with respect to cryptocurrencies like Bitcoin and the role it plays and will play in the financial sector. However, most of the investors are not in favor of relying on it for conducting business. Paul Tudor Jones, a macro investor bestowed some much-needed confidence in it by buying Bitcoins as a hedge to face the inflation that is going to come due to the current strategies being adopted by the central banks. He even went to the extent of comparing it with the role that gold played in the financial crisis that took place in the 1970s.
Paul Tudor Jones
In a recent note called "The Great Monetary Inflation" written by the Chief Executive Officer and the founder of the Tudor Investment Corp, Tudor mentioned that winning the financial race depended on betting on the fastest horse and he foresees Bitcoin as the one during the upcoming crisis.
If you look at the current financial status of Paul Tudor, a very minuscule percentage of it is dedicated to cryptocurrencies like Bitcoin. However, it seems like the pattern is going to change soon as he looks to build a substantial hedge fund based on it itself. He is also going to be one of the first managers to place his confidence in this aspect after Bitcoin has been primarily frowned upon by others from the same market. He came to this decision after a lot of speculation regarding the pandemic, coronavirus.
Most of the central banks are busy with fiscal spending and buying bonds in order to consolidate themselves. In tumultuous times such as these, Bitcoin seems to be the one that will emerge profitably. He could tell this with utter certainty after he discovered that almost $3.7 trillion, which is almost 6 percent of the total economy has already been printed since the time coronavirus started meddling with the financial market.
Paul Tudor Jones, at 65, is one of the most senior investors in the market. In his many years in this business, he has gained enough experience to spell out what is going to happen in the future. Although he claims he hasn't seen such instability in the market before, he is sure of the fact that all forms of money will see a massive expansion in the upcoming times. When a situation as unprecedented as these arises, it is common to find people like Tudor to look for investments that will continue raking in the profits.
He claims to have ventured into a number of options, ranging from Gold to Treasuries to different stock types before coming to the conclusion that Bitcoin is the next big thing and it needs immediate consideration. This may sound a little far-fetched at the moment though, as the valuation of Bitcoin has been on the decline continuously and almost doubled down from the lowest value that it reached around March.
Paul Tudor is not completely inexperienced as far as investing in Bitcoin is concerned though. He had dipped his foot into the ocean in 2017 when he made some valuable investments to get his money doubled in no time. He even took advantage of the high returns from Bitcoin when it stood at $20,000. Even though the investment was a short-term one and he didn't go all-in with it, he realized that it had the four important characteristics that are needed for a financial system to survive in the market. They included liquidity, the power to purchase, trustworthiness in the market, and how easily it is portable from one account to another. If you assess these four entities, it looks like Bitcoin comes on top of each one of them.
Paul Tudor believes one of the main reasons that Bitcoin will reach elevated heights in the market soon is because of the fact that the digitization of money has been on the rise. People are letting go of hard cash in favor of digital or virtual money. The current situation of Covid-19 which can spread through contact and currencies and notes is a common nidus for it actually accentuated the progress. It is time that the old regimen of the financial market is given the shove and the newer methods are accepted as given in the theories of Milton Friedman.
There have been financial crises before but the one that is related to Covid-19 will be significantly different than the previous ones, claims Paul Tudor. The sheets that are lent by the banks are more and the Federal Reserves are allowing more and more of them to make money from it.
There is no denying the fact that due to the pandemic the demand for a number of substances has been on the low as people will not be very eager to head out and buy stuff immediately. Consequently, the prices of different commodities will remain under control or at a lower rate only. However, the situation is going to reverse sooner or later.
It won't be long that the Federal Reserve will go into a recovery phase and the rate of interest will be significantly higher to compensate for all the money printed prematurely earlier. Moreover, the Federal Reserve may soon start to get influenced by the political architecture and pressure and start functioning abnormally. Thus, the hike in rate will be inexplicable and not as expected and the economy is almost surely going to take a hit.
Paul Tudor Jones has been in this scene since the 1970s when he finished his economics degree from the University of Virginia. He was also able to experience the crisis of 1976 which was one of the major financial blowouts of the decade. Gold was the only saving grace during that time. He feels Bitcoin is going to play a similar role in the market in the times to come.