Bitcoin’s Stunning Growth Makes it Investable, Admits Legendary Hedge Fund Manager
Mark Mobius, an emerging markets fund manager and the founder of Mobius Capital Partners, said that if bitcoin continues to grow at the current rate, he would consider investing in the dominant crypto asset.
Earlier this month, Mobius said that every portfolio needs to hold ten percent of gold to hedge against the global economy and the performance of the equities market.
Is bitcoin as a store of value narrative strengthening?
On Bloomberg Daybreak: Middle East, Mobius said that despite the presence of geopolitical risks as a result of the U.S.-China trade dispute, investors should be exploring both stocks and gold.
During the interview, Mobius said that bitcoin, at the current juncture of growth, is not necessarily viable as a store of value but if it grows, it would have to be a buyer and become involved in the market.
I’m not a buyer but I realize that it is something we have to account for. The reason why i am not a buyer is that i don’t know what the real value is and unless it is so widely held and accepted then that’s a different story. Let’s face it: all currencies are based on faith. If you have faith in the dollar or faith in the renminbi or faith in the euro, whatever it is, then you can use it.
But the problem with these cryptocurrencies is that it is not that widely used except in a lot of illicit activities. But, at the end of the day, there are many people who do believe in it and if it continues and grows, then I would probably have to be a buyer and be involved in this.
In the past year, the narrative of crypto assets like bitcoin being used primarily to settle proceeds of criminal activities has noticeably subsided due to the emergence of various blockchain analytics firms and technologies.
Regulated exchanges and trading venues employ sophisticated technologies and companies to prevent terrorist financing and money laundering which have been effective in recent months.
For large-scale investment firms and high-profile investors like Mobius, strictly regulated, transparent, and government-approved investment products are necessary to enter the market.
Consequently, regulated products like Grayscale’s Bitcoin Investment Trust (GBTC) and Ethereum Investment Trust (ETHE) have seen substantial premiums as the bitcoin price increased by more than 200 percent year-to-date against the U.S. dollar.
Despite the growth of bitcoin, in comparison to gold, which has been considered a safe haven assets for many decades, bitcoin only accounts for around 2.5 percent of the market cap of gold.
Although Bitwise has said in its March report that the volume or liquidity of bitcoin relative to its market cap is healthy, the market valuation of the asset would have to grow exponentially for it to be widely considered as a safe haven asset.
G20 direction is helping
Several major economies have geared towards practical regulation to facilitate the growth of the crypto industry while providing oversight in the sector to protect investors.
Singapore, where Mobius is based, has recently proposed a bill to end goods and services tax (GST) on cryptocurrency transactions. The currencies cited by the bill of the Singaporean government included Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple, and Zcash.
“A supply of digital payment tokens in exchange for fiat currency or other digital payment tokens will be exempt from GST. Therefore, the supply of such tokens, being an exempt supply, will not contribute to your annual taxable turnover for the determination of your liability for GST registration,” the bill from the Inland Revenue Authority of Singapore read.
Clarification on the regulatory frameworks surrounding cryptocurrencies, the emergence of well-regulated trading venues, and the involvement of large-scale financial institutions are likely to strengthen the store of value narrative of bitcoin.