Some of the largest hedge funds are reportedly increasing their holdings in cryptocurrencies.
The list includes names like Brevan Howard Asset Management LLP and Tudor Investment Corp, according to the Wall Street Journal.
‘More Crypto Than Gold’
Brevan Howard declined to comment. Tudor Investment did not immediately responded to a request for comment.
Institutional investors as a whole traded $1.14 trillion of cryptocurrencies in 2021, according to Coinbase, up from $120 billion the year before, and more than twice the $535 billion for individual investors.
“There is opportunity for outsized returns for asset managers who want to be early investors in digital assets that are successful,” said Michael J. Torosian, a partner with Baker Botts L.L.P. “Investors see cryptocurrencies as non-correlative to traditional asset classes and a good diversification tool and a hedge against certain risks such as inflation.”
Torosian said the improvements in the regulatory landscape as well as the establishment of exchanges and more ways to store and protect digital assets “has given managers a better opportunity to evaluate adding crypto to their portfolios.”
Brevan Howard launched a cryptocurrency hedge fund in January that will begin accepting outside investors.
The fund is making bets on the direction of bitcoin, ether and other cryptocurrency prices, while also searching for arbitrage between currencies and investing in blockchain technology.
Roy Rochlin/Getty
Brevan Howard created a crypto division, BH Digital, in September, which manages over $250 million and has 12 portfolio managers.
The firm named Colleen Sullivan, a co-founder and former CEO of CMT Digital, to lead its investments in crypto.
Alan Howard, the firm’s co-founder, has also invested in crypto, blockchain and digital-token businesses.
Paul Tudor Jones, who runs Tudor Investment, has been buying cryptocurrencies to try to protect against rising inflation.
Hudson Bay Capital Management LP, a $15 billion New York hedge fund, has seen growing profits from trading cryptocurrencies, the Journal reported, citing a person familiar with the situation, as are other large firms.
In February, Ray Dalio, who founded the world’s largest hedge fund, Bridgewater Associates, repeated that he owns “a little bit” of bitcoin, calling it “almost a younger generation’s alternative to gold.”
“Bitcoin is like gold, though gold is the well established blue-chip alternative to fiat money,” he said.
Dalio has also said it would be reasonable for each investor to allocate 1% to 2% of one’s portfolio to bitcoin, the most popular cryptocurrency.
‘One of Greatest Stories in Finance’
Hedge funds and weren’t always fund of cryptocurrencies.
Mark Mobius, founder of Mobius Capital Partners, told CNBC in November that cryptocurrencies are more like a religion than investments.
“People should not look at these cryptocurrencies as a means to invest,” he said. “It’s a means to speculate and have fun. But then you got to go back to stocks at the end of the day.”
Citadel’s Ken Griffin recently admitted that he was wrong to compare bitcoin to the tulip bubble back in 2017.
He noted that crypto has been one of the “greatest stories in finance” in the last 15 years.
Other financial services executives have also been critical of crypto.
Dimon has in the past described cryptocurrencies as worthless and refer to them as Crypto tokens rather than currencies
Jamie Dimon, CEO of JPMorgan Chase (JPM) – Get JPMorgan Chase & Co. Report, has in the past described cryptocurrencies as worthless and refer to them as Crypto tokens rather than currencies.
Still , the financial giant staked a claim in the metaverse last month when it opened its Onxy lounge in Decentraland, a 3D virtual world browser-based platform.
Dimon’s photo hangs on the virtual wall.
Crypto got more mainstream attention Wednesday after President Joe Biden signed an executive order on cryptocurrency.
Among other things, Biden’s order directs Treasury and other departments to come up with policy recommendations “to address the implications of the growing digital asset sector and changes in financial markets for consumers, investors, businesses, and equitable economic growth.”
