Hedge Funds: Bitcoin In Play as Funds Dive Back In

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Crypto Hedge Funds Move In On Bitcoin. 

Bitcoin fell by 50 percent in cryptocurrency’s price in March, but subsequently rose back up to trade at $11,200.  Investors should caution as this trend could lead to another major slump — most notably like the 2017 80 percent Bitcoin slump.  Especially with the uncertainty of COVID-19, investors will need to keep their eyes on Bitcoin.  Several crypto hedge funds have closed as a result of the pandemic.  Bitcoin remains unreliable, as many people are trading with lots of debt.

Despite its lack of predictability and abundance of risk, some investors remain emphatic about the cryptocurrency.  Some New York investors and banks are considering Bitcoin and cryptocurrency as a possible hedge against a currency-related disaster.  Investor Paul Tudor Jones cites Bitcoin’s scarcity premium as a plus.  He claims that between one and two percent of his assets are in digital currencies, which he uses as downside protection.  Also, Renaissance Technologies’ fund, Medallion, will invest in Bitcoin. 

This is becoming an increasingly logical method of insurance against a financial downfall.  In a Bank of America survey, 71 percent of stock managers believe that equities are overvalued.  This leads many investors to believe that diversifying is the best option.  This diversification could include Bitcoin in the portfolio.  

Outlook. 

Still, Bitcoin is still uncharted and heavily unpredictable territory.  The currency’s artificial supply and lack of universal adoption makes it difficult to invest in.  According to research firm Chainalysis, 60 percent of Bitcoin supply is hoarded and 20 percent is lost.  The influx of hedge funds in the crypto market will further contribute to not only the positives of Bitcoin, but also the negatives.  Ultimately, the rising interest in Bitcoin will likely be short-lived.

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