Bitcoin faces the prospects of undergoing broader downside corrections as hedge funds rush to short stocks that surged impressively during the coronavirus pandemic. According to the Financial Times, some fund managers have increased their bets against the shares linked to technology, home gym equipment, grocery retail, and healthcare. Hedge fund strategies thrive on this type of activity as they aren’t limited only to betting on the rise in the BTC price. Strategies including market-making funds, bitcoin lending and ICO investing (in which institutional investors are often offered discounted token prices as early buyers). Most crypto hedge funds trade Bitcoin (97%) followed by Ethereum (67%), XRP (38%), Litecoin (38%), Bitcoin Cash (31%) and EOS (25%). Additionally, almost half of the hedge funds surveyed by PwC reported that at least half of their daily cryptocurrency trading volume was Bitcoin. Bitcoin Outperformed all Hedge Fund Strategies in
Hedge funds bitcoin strategyBitcoin Gets Ready for a New Type of Hedge - CoinDesk
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Could you be next big winner? Even just adjusting the ratio is missing the point. The underlying vulnerabilities for stocks and bonds now overlap. Even without a divided government in the U. This will keep bond yields down, equity prices stable or rising, and deficits ballooning.
The traditional mix hedged against the business cycle: In years of economic growth, equities did well, and in years of contraction, bonds stepped in. Only, the business cycle no longer exists. The signals that interest rates used to send have been overridden by central banks, which means that investment managers that still believe in business cycles are flying blind.
Expansionary monetary policy in the past has counted on the resulting economic growth to absorb the new money supply. The numerator GDP and the denominator amount of money in circulation grow together, so that each monetary unit will at the least hold its value.
Now, new money is flooding the economy just to keep it afloat. The numerator remains flat or even declines while the denominator shoots up. The value of each monetary unit falls. A falling base currency hits the values of both equities and bonds in long-term portfolios.
Savers are less wealthy in terms of purchasing power than they once were. In an environment where currency debasement looks increasingly certain, a new type of portfolio hedge is needed. Gold is one such asset. Bitcoin is another, with an even more inelastic supply. The fundamentals have moved on, yet most portfolios are still hanging on to an out-of-date formula.
Nothing in this newsletter is ever investment advice. They need to rethink what hedging means, and what risks their clients really are facing long-term. Not doing so is financially irresponsible. With so much change, we instinctively reach for the comfort of the familiar. Yet it is precisely when things cease to make sense that assumptions need to be questioned. In modern times, there has rarely been as much uncertainty about so many fundamental pillars of progress as now. In these times, the roles of professional investors and financial advisers are more crucial than ever, as savers urgently need not only guidance but also protection.
It is, therefore, increasingly imperative that we rethink portfolio management strategies, even for conservative profiles.
These are still generally too illiquid to withstand significant institutional interest, but the experimentation going on in the field as well as on the part of investors points to the eventual emergence of innovative services and strategies that can handle greater volumes with controlled risk. This highlights that the crypto asset market is growing up, which will bring in more institutional money, which in turn will incentivize further product and service development from Genesis and others.