As reports hit the United Kingdom in mid-June warning that inflation rates had fallen to a four-year low, high-profile fund managers were conversely worrying that the COVID-19 stimulus from governments and central banks would ultimately drive up prices.
In a recent market outlook note, famed hedge fund investor Paul Tudor Jones warned that:
“We are witnessing the ‘great monetary inflation’ — an unprecedented expansion of every form of money unlike anything the developed world has ever seen. High debt accommodated by money printing is difficult to banish. Inflation expectations could one day respond to this reality.”
Crispin Odey, the London-based founder of Odey Asset Management, also agrees inflation is ultimately unavoidable given the level of stimulus. “In the short term, the money will be made on the inflation bet,“ Odey wrote in a recent letter. With potential inflation seemingly on the horizon, investors are looking out for the next big hedge in order to protect assets during the nascent economic crisis.
Is Bitcoin the new gold?
Jones, for one, has decided a way forward is to invest his fund, Tudor Investment Corporation, into Bitcoin (BTC). “If I am forced to forecast, my bet is it will be Bitcoin,” commented Jones in the same letter to investors. “Bitcoin reminds me of gold when I first got into the business in 1976.”
After the United States Federal Reserve indicated on June 10 that interest rates will remain near 0% until 2022, Bitcoin saw a short-lived run past $10,000, gaining 1.6% over 24 hours before dropping back.
Institutional investment managers have been increasingly interested in all things crypto over the past couple of years, and their interest keeps rising. A recent Fidelity report shows that in a survey of almost 800 institutional investors across the U.S. and Europe, 45% of firms in Europe say they hold crypto assets. Fidelity goes on to report: