Why did Wall Street legend Paul Tudor Jones buy Bitcoin?

A few days ago, Paul Tudor Jones, a well-known Wall Street fund manager, said in an interview with CBNC that he allocated more than 1% of his assets to Bitcoin.

Who is Paul Tudor Jones?

He is a legend on Wall Street and was once ranked as the second live trader by CNBC, and the first is the famous George Soros. Jones began his financial career in the mid-1970s, starting with trading cotton, with a remarkable record. In 1984, he established his own Tudor fund, starting from 1.5 million US dollars, and the total fund grew to 6 billion US dollars by the end of 1992.

There are many classic battles. For example, on October 19, 1987, the “Black Monday” stock market crashed. When most investors suffered heavy losses, the Tudor Fund harvested 62% of the gains; the European currency crisis occurred at the end of 1992. Profited hundreds of millions of dollars in a few months. Of course, his most legendary is not these classic cases, but his long-term stability. According to the “New York Times” report, as of mid-2014, Tudor Fund had no loss for 25 consecutive years, with a long-term average annual return of 19.5% . This is a miracle in the hedge fund industry. Long-term stability is the root of his legend.

And his long-term stability stems from the early profound lessons. In 1979, he was so fierce that he lost two-thirds of his money when he played, and even suspected that he was not suitable as a trader. This incident allowed him to learn that many traders can’t do it in his lifetime: what he earned yesterday is history, he starts from zero every day, and the monthly loss cannot exceed 10% at most. This is one of the most important ideas of his trade: the most important thing to do is to defend, not to attack. He determined the stop loss in advance so that he would not leave the game. The following paragraph can fully reflect its trading philosophy:

In 1987 Michael Green (Michael Glyn) directed a documentary, including Paul Tudor Jones in the film

It is mentioned in: “What you want is always under your control, never hope so. Always trade, the most important thing is always to protect your assets. This is why most individual investors or traders lose money The reason is because they are not focused on the loss of money. They need to focus on the risks faced by their funds and focus on the amount of risk funds they face in any investment, instead of spending 90% of their time on what they How much money can be made in the big cake of rapid development in the future. If this can be done, then they will be very successful investors. “

The search for asymmetry should be pursued by every top investor throughout his life. Jones is no exception. This is what we often say about the ratio of benefits to risks. If the return to risk ratio is 5: 1, this means that as long as it is correct once, you will not lose money. Jones has been looking for a variety of different trading opportunities, looking for such asymmetric opportunities.

In addition, Jones’ strategy likes to make money when trends change. Once he finds such changes, he will enter the market or sell off. He also developed detachment skills. He is very cruel to the market. Anything that has happened, in his eyes, is history that doesn’t have to be entangled. He once said: “I really don’t care about the mistakes made three seconds ago. I only care about what to do next. I want to avoid any emotional attachment to the market.”

So, as such a successful legend, why buy Bitcoin?

Why Paul Tudor Jones bought Bitcoin

There are two most important reasons: asymmetric investment opportunities and risk hedging.

Asymmetric investment opportunities

This is what Jones has been doing before: seeking asymmetric investment opportunities. Bitcoin is a rare asymmetric investment opportunity in today’s world. Asymmetric investment opportunities mean two things:

* Investment means risk, since it is an investment opportunity, then bitcoin is also risky.

* Asymmetric means that in terms of its return-to-risk ratio, the probability of return is higher than risk.

Jones invested 1% of his personal assets. For him, in line with his defensive style, this asset would not cause him to incur large losses. But if Bitcoin succeeds, it can generate huge gains. For his worth, 1% of his assets are at least tens of millions of dollars.

Risk hedging

According to media interviews with Jones, there is also a very important willingness to accelerate Jones’s decision-making, that is, the current drastic changes in the macro economy. The world economy was already showing signs of downwards in 2019, and the epidemic in 2020 put the macro economy in a difficult situation for a century.

Paul Tudor Jones is a macroeconomic investor. Like Dalio, he is most concerned about changes in the macroeconomics. The reason is simple, because their investment income is directly related to the macro economy. Now, since February this year, trillions of dollars have been issued to the market, which is an unprecedented speed and change.

For these macro investors, in the face of this future uncertainty, it is very important to hedge risks. They thought of gold, treasury bonds, some stocks, currencies, etc., but at the same time, Bitcoin also entered the perspective of these macro investors.

Jones believes that the best strategy for maximizing earnings is to have the fastest horse. During the period of substantial currency issuance, he bet on Bitcoin. According to Bloomberg reports, its Tudor BVI Fund may hold bitcoin futures that account for single digits of its capital. Considering the size of its fund, this is a very large amount, and it is also representative. This is the first big fund to start embracing Bitcoin.

Jones believes that he is not a strong fan of stable currencies or cryptocurrencies. And he owns Bitcoin more because of the arrival of the Crypto era of currency, and it accelerates with Covid-19. In addition, the recovery after the epidemic will be different from the recovery of the historical financial crisis. The Fed allows banks to lend more aggressively. In the short term, the prices of goods and services will not rise, but in the long run, they cannot stop the trend of inflation. It will not be easy for the Fed to raise interest rates in the future to suck back these massively triggered currencies. At the same time, government and corporate debt are rising rapidly, and it is even more difficult to digest these. At the same time, Jones stated that he is still a believer in gold.

Chamath Palihapitiya, who is also an investment tycoon, commented on Paul Tudor Jones ’s approach as follows. In an interview with CNBC, he mentioned that it is difficult to find asset types that are not related to other assets like Bitcoin, and Paul. Tudor Jones is concerned about Bitcoin because of the current economic situation, he must find a hedge asset to protect himself

It can be seen from the above: Bitcoin is a hedge asset in their eyes when dealing with macroeconomic changes. Therefore, there is no need to raise the status of bitcoin in the eyes of these Wall Street tycoons. For them, this is just a hedgeable asset. But at the same time, it also shows that Bitcoin is not the original Wuxia Ameng, and began to enter the vision of these big brothers and institutions, so that they can not ignore the existence of Bitcoin.

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