In a CNBC appearance on Monday, billionaire investor Paul Tudor Jones stressed that cryptocurrencies like Bitcoin will be valued higher despite the current volatility in the crypto space.
Speaking with CNBC’s Squawk Box on October 10, the American hedge-fund manager underlined that there would be significant consequences if inflation is not tamed “we’re going to have to have fiscal retrenchment.”
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Mr. Jones said he holds Bitcoin and that he’s “always had a small allocation of it”. According to Jones, in a time when there’s too much money, something like crypto and beaten down inflation hedges will have value at some point.
When there’s too much money why, which is why we have inflation and too much physical spending something like crypto, specifically Bitcoin and Ethereum where there is a finite amount of that. That will have value at some point, someday.
The billionaire said that he did not know when that day would come, but that it would have value owing to the scarcity and that value would be far more than it is now.
Monetary tightening or hand-waving?
In 2020, the Federal reserve unleashed the largest stimulus package ever conceived. The stimulus was aimed at keeping the traditional financial system afloat alongside ill-fated Covid-19 lockdowns and growing geopolitical tensions.
Central banks today have gone the other way, tightening monetary policy in a so-far fruitless effort to tame the inflation they created. The BoE, BoJ, PBOC and ECB have all flip-flopped on monetary tightening policy in one form or another however; whether it’s through yield-curve control, or promissory liquidity taps, as credit risks increase, partly on the back of inadequate energy supplies in Europe.
Genie out of the bottle
“Inflation is a bit like toothpaste,” continued Jones. “Once you get it out of the tube, it’s hard to get it back in.”
The Fed “is furiously trying to wash that taste out of [its] mouth … If we go into recession, that has really negative consequences for a variety of assets.”
Crypto markets have experienced two major insolvency events this year, which began with the TerraUST scheme blowing up in May. The same cannot be said for traditional finance, which is facing accelerating financial pressures presently.
The conceptual take-away from traditional market turmoil is this: do you put your money into a financial system that’s mired in credit risk, contagion risk that has yet to play out, sovereign debt crises, etc. or do you put it into $btc which has none of that now (relatively)?
— Chris on crUPto (@ChrisOnCrypto1) October 11, 2022
While Jones believes Bitcoin will have value, he concluded that cash will remain strong provided the Fed follows-through on its pledge to bring inflation down to the 2% target. His comments came as Bitcoin exchanges hands around $19,000.
So far, this policy has wrought havoc on financial markets, pushed asset correlations to one, while threatening to create a prolonged global deflationary bust in traditional finance, per an open letter from asset manager Ark Invest.
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