Many hedge funds have diversified their portfolio with Bitcoin exposure in recent years, but a majority still do not encourage digital currency investments. Rebecca Patterson, Investment Research Director at Bridgewater Associates, recently explained the major hedge funds’ hesitation in Bitcoin.
“Right now, Bitcoin can move 10 percent on a tweet. That’s not exactly a stronghold of wealth for most institutional investors,” Patterson told Bloomberg TV in an interview. She was referring to the tweets of billionaire Elon Musk.
Patterson elaborated that Bitcoin is ten times more volatile than the US dollar and double of the Venezuelan bolivar, the fiat of a hyper-inflated country. “You want to see lower volatility, more stable asset if you want to consider it as a stronghold of wealth, a diversifier,” she added.
But, volatility is not the only drawback of hedge funds’ Bitcoin adoption. Liquidity is also a major concern, as we have seen supply shortages multiple times, along with regulatory uncertainty.
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“The more you get a real regulatory ecosystem developing around bitcoin, other cryptocurrencies, the more other types of investors are going to be comfortable coming in. That’s going to bring the liquidity. That’s going to reduce the volatility,” Patterson added.
“If there were one thing I were watching first, it would be seeing more regulatory certainty, and I’m not sure when that’s going to come in the US.”
Bitcoin Is Gold
Bridgewater Associates is currently the largest hedge fund, managing more than $150 billion worth of assets. Its Founder, Ray Dalio earlier compared Bitcoin with gold, setting a stage for institutional adoption of digital currencies.
Despite Patterson’s concerns, many major hedge funds are investing in Bitcoin. The Miller Opportunity Trust, the flagship fund managed by Bill Miller, received regulatory permission for up to 15 percent indirect Bitcoin exposure.