Many fear fiat currency inflation and want to protect themselves with gold and/or Bitcoin (BTC), including billionaires like Paul Tudor Jones. Now, once again, an investment firm, Horizon Kinetics, advises to bet on the king of cryptos to hedge against the inflationary tsunami.
Bitcoin and crypto assets: a hedge against inflation?
Horizon Kinetics has $7 billion in assets under management. To protect its clients from runaway inflation, exacerbated by central banks’ monetary printing following the coronavirus crisis, the American fund is banking on a portfolio composed of a mix of commodities, real estate and companies with a solid business model.
As Peter Doyle, one of the 3 co-founders of Horizon Kinetics, explains in an interview with the Financial Times, the debt problems of countries around the world (led by the US) have become so serious that they can only be resolved in one of two ways: either by default or by depreciating a country’s currency to relieve the pressure of debt.
Faced with this threat, and in addition to the traditional protective investments above, Horizon Kinetics is placing an increasing share in the new asset class of crypto-currencies.
Strengthening position in Bitcoin to protect against fiat currencies
Indeed, starting in 2016 with an initial stake of just 1% of their Paradigm fund in Grayscale Investments’ Grayscale Bitcoin Trust (GBTC), the managers have now grown to over 10% of those funds invested in GBTC.
“We’re not here for everyone, and we’re looking for investors who have a minimum [investment] horizon of 3 to 5 years in our funds… Our investment philosophy is to own assets with a long-term view, and we want our investors to think the same way… ) People should have exposure to the [cryptocurrency] asset class (…) the supply of bitcoin is fixed and limited, which gives it a real scarcity premium at a time when there are concerns about [fiat] currencies losing value. “Peter Doyle
A long-term strategy, including cryptos, that seems to be largely winning for Horizon Kinetics, as the firm owns 3 of the top 10 performing asset funds of 2021 (Small Cap, Spin-off and Paradigm).
From a long-term investment perspective, which is therefore not concerned with short-term fluctuations and volatility, Bitcoin and cryptocurrencies appear to be an excellent option to protect against the depreciation of state currencies. In any case, their high inflation is considered by the biggest, including BlackRock, the largest investment fund in the world.