Bitcoin In The Institutional Investment Portfolio

In May 2020, Paul Tudor Jones sent a remarkable letter to the participants of his “Tudor BVI Global Macro” Fund [1]. He revealed that the fund would take a position in bitcoin. Should institutional investors follow this example?

The increased market capitalisation of bitcoin in 2017 meant that a single Dutch institutional asset manager felt compelled to get a better idea of bitcoin and other crypto assets. There was a new asset class on the rise that quickly surpassed the market capitalisation of other asset classes in which investments were already made. A lack of solid fundamental valuation methods and sky high volatility led to continuing domination of skepticism. Nevertheless, renowned institutional parties give bitcoin a place in the portfolio 3 years later. Why would an institutional party consider investing in bitcoin? In this article I share two thoughts to help you formulate an answer to that question yourself and I conclude with a vision for the future.

What drove bitcoin's creation?

Satoshi Nakamoto (the pseudonym of bitcoin's still unknown creator) saw the 'trust problem' as the main reason behind bitcoin's design. According to Satoshi, the biggest problem with conventional money was the huge role that trust plays in making the system work. For example, to transfer money you have to trust a…