Byrne Hobart, a CoinDesk columnist, is an investor, consultant and writer in New York. His newsletter, The Diff (diff.substack.com), covers inflection points in finance and technology.
The bull case for bitcoin as a store of value is simple: at first nobody owns it. Then it’s owned by people who are some combination of crazy and smart, but generally crazier than they are smart. Over time the craziness requirement drops, more investors buy it and it becomes dumb not to own a little. Since existing monetary systems are necessarily optimized for the status quo – and the dollar is, in fact, very well optimized for a globalized world with a hegemonic United States – an alternative system like bitcoin is necessarily a bet on a weirder world.
We certainly live in a weird world today.
And some sophisticated money managers are taking notice.
See also: Hedge Fund Pioneer Turns Bullish on Bitcoin Amid ‘Unprecedented’ Monetary Inflation
Paul Tudor Jones II, a well-regarded global macro investor, made headlines last week when he announced he’d bought bitcoin and planned to invest up to a single-digit percentage of his net worth in the currency. PTJ is not exactly a nose-ringed millennial day trading on Robinhood. He’s been running his fund since 1980 and has accumulated almost $40 billion in assets under management.
Jones is best known as a global macro investor, placing bets on interest rates, currencies and commodities. He founded his firm at the beginning of a golden age of macro investing, as the world worked through the implications of the collapse of the Bretton Woods system, volatility in oil and the rise of Japan. In one five-year period, Jones’ worst annual return was 99.2%. But since the heady days of the 1970s and 1980s, macro has gotten more challenging, and the pace has slowed. Aggressive traders used to be a powerful force (in the mid-1990s, U.S. President Bill Clinton was shocked by how powerful funds were, exclaiming to an adviser: “You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of f—ing bond traders?”)
Since then, several things have changed. Central banks have gotten more powerful because declining inflation gave them more flexibility to raise and lower rates to stimulate growth, and their perceived success in averting crises gave them a broader mandate. Meanwhile, the macro market has gotten more competitive: There are more pure macro funds, and the banks and businesses that took the other side of their trades have gotten more sophisticated. Today, macro funds try to eke out modest gains instead of betting on the rise and fall of nations.
But their trading style remains intact. Paul Tudor Jones’ approach is well documented in interviews, including the classic documentary Trader. Jones’ approach boils down to two…