Hitting social media this week is news of two influential hedge fund managers investing in Bitcoin.
George Soros, whom for most people would not require an introduction, has given the green light for his family fund to trade in Bitcoin and potentially other cryptocurrencies.
Mark Yusko, CEO of Morgan Creek Capital has been one of the few wall street analysts that understands the underpinnings of Bitcoin and is very bullish for Bitcoin long term (20 years plus).
Yusko, who in early 2017 going against common wisdom was lucratively bearish the US dollar, is launching a $500 million fund to invest directly in crypto-currenices and blockchain related companies.
In the years leading up to 2018 traders and investors in Bitcoin comprised mostly of individuals and ‘fringe’ groups. Mainstream finance could not easily invest in Bitcoin and were discouraged by its decentralised nature and deregulated exchanges. Kyle Bass, whose hedge fund foresaw the 2006 housing crisis stated that he wanted to buy some Bitcoin but by it took two weeks for his account to get verified and as the price appreciated in that period he didn’t execute the trade.*
In 2017 Bitcoin core developer Jimmy Song reflected that he met with hedge fund managers whom personally invested in Bitcoin but their fund had not. Now that these hedge fund managers have been meeting with the right people and have cognitively adapted to seeing Bitcoin as functioning on Moore’s law and not linear pricing they will start buying with a longer term horizon.
Mark Yusko argues that if Bitcoin were to attract the same amount of capital as the gold market then one Bitcoin would be worth at minimum $400,000.
However there is a word of caution. If Wall St and private hedge funds are about to buy Bitcoin then their collective skills and capital would dictate that they would want to flush out most of the open bids (orders) before they offer (buy).
An old dictum is ‘The best time to buy property is when there’s blood on the streets’; potentially we could see a huge dump in the price of Bitcoin (which can now be done on the CME options exchange) and when even the most fervent hodlers have capitulated and tweeting that ‘crypto is dead’ then we would have bottomed and the flood of money will come in.
This is not a prediction, just a reflection. And an easy way of avoiding all this potential stress is to only invest what you’re willing to lose and don’t look at the price for five years.
- Mark Cuban: In Conversatin with Kyle Bass – the Maverick Investor. RealVisoin TV. Aired 3 November 2017 www.realvision.com