(Bloomberg) – Gold is set to hit new highs next year, but investors seeking currency alternatives as global debt balloons rise should focus on Bitcoin, according to a $ 7.5 billion hedge fund.
Both are likely to rebound even if the Federal Reserve moves to curb asset purchases, said Troy Gayeski, co-chief investment officer and senior portfolio manager at SkyBridge Capital. The two are often compared by investors, with former Treasury Secretary Lawrence Summers saying that as something like digital gold, cryptocurrencies could remain a feature of global markets.
“We’re going to stick with bitcoin and crypto because we just think there are more benefits,” Gayeski said in a phone interview last week. Although there is more volatility, “you will get a little more juice out of this phenomenon than in gold,” he added.
Investors are following the Fed’s comments as inflation ticks higher and policymakers nearer reducing the huge asset purchases that saved the economy from the turmoil created by the pandemic. Monetary support has pushed the Fed’s balance sheet to a record high, while hefty budget spending has pushed public debt up. Both of these can pose a potential risk to the value of the dollar and potentially exacerbate the appeal of alternatives. “All of the fiat currency alternatives – all of which have gone through significant corrections relatively recently – are now in a much better place to deal with this eventual rejuvenation and gradual slowdown in monetary growth than they were as they made higher highs after higher highs “Said Gayeski.
Both Bitcoin and gold have seen significant swings this year that unfolded amid a debate over whether the cryptocurrency was pulling demand from gold bars. The digital token rose to a record nearly $ 65,000 in April before crashing. Most recently it was $ 36,600. Gold was close to sinking into a bear market in March but reversed price to make up for losses since the beginning of the year.
Leading Wall Street banks are split on the pair’s relative merits – Citigroup Inc. said gold is “losing its luster” versus cryptocurrencies, while Goldman Sachs Group Inc. argued that the two assets can coexist. Tesla Inc. boss Elon Musk, whose tweets have shaken Bitcoin prices this year, said in May that he supports cryptocurrencies versus fiat or paper currencies.
Gold bar, which hit a record over $ 2,075 an ounce last year, has now bottomed out, according to Gayeski. Many of the concerns about the taper talks have been removed, and even if it is announced, the Fed will not slow the pace of its purchases until 2022, he said.
“Going forward, the likelihood that gold will continue its uptrend is pretty good and will hit new highs in the next year,” he said.
With signs of recovery mounting, the Fed buys $ 120 billion in government bonds and mortgage-backed securities every month, and its balance sheet has grown to $ 8 trillion, about a third of GDP. The discussion about reducing this support – which has the potential to boost government bond and dollar yields, which tarnishes the appeal of gold – is drawing nearer.
SkyBridge, a fund of funds manager, has little exposure to a gold mining company that is benefiting from an ongoing gold price rally. The main exposure is in US cash flow generating strategies backed by, among other things, property, plant and equipment, distressed corporate loans and convertible bond arbitrage. The company’s Bitcoin fund is up 51.2% from its launch last December to June 1.
SkyBridge founder Anthony Scaramucci has partnered with First Trust Advisors on an exchange-traded fund that plans to buy and sell Bitcoin, and Gayeski expects the Securities and Exchange Commission to approve the product by the fourth quarter of 2021 or the first quarter of next year becomes .
“The only reason we exist professionally is to find interesting ways to generate attractive uncorrelated returns that also have an attractive risk / reward profile,” said Gayeski. “The strategy mix in our broader portfolio is reinforced by a small but significant position in alternatives to fiat currencies like Bitcoin.”
(Updates the Bitcoin price in the sixth paragraph)
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