Bitcoin’s (BTC) price volatility and liquidity issues are stopping Bridgewater from investing in the crypto
Bridgwater wants to see greater liquidity and lesser price volatility for Bitcoin before considering investing in the crypto.
Fri, 26 Feb 2021, 14:46 pm UTC
Bitcoin and the crypto market’s rally is partly attributed to the entry of institutional investors. However, one institution remains reluctant to join the trend due to BTC’s price volatility and its liquidity issues.
In an interview with Bloomberg on Wednesday, Bridgewater's director of investment research Rebecca Patterson discussed her firm’s investment strategy. With a number of institutional investors already investing in Bitcoin, the crypto came up during the discussion.
Patterson said that she “wouldn’t call Bitcoin an alternative currency,” Business Insider reported. A better comparison for the crypto would be that of gold as both assets share some similarities.
“They’re similar, supply constraints and it [BTC] is something that investors have been looking into as they worry about fiat currencies being devalued by all these central bank printing,” the Bridgewater director told Bloomberg.
While a lot of people have made money by investing in Bitcoin, Bridgewater remains hesitant to invest in the crypto. “As institutional investors, we don't know yet if it's going to be digital gold, it may be over time, but I don't think we can say that with confidence yet,” Patterson explained. “And that affects our view on whether or not our clients should own it.”
Patterson said there isn't "one green light" that will signal Bridgewater to start investing in BTC. However, she revealed that there are some things that the firm is looking for.
One of the concerns that are stopping the firm from investing in the crypto is its price volatility. “Right now Bitcoin can move 10% on a tweet, that’s not exactly a store of wealth for most institutional investors,” the executive elaborated. “So the volatility of Bitcoin is about 10 times that of your dollar, it’s still double that of the Venezuelan bolivar.”
Bitcoin’s liquidity issue is also a concern for the firm. Patterson said that greater liquidity is possible with regulatory certainty.
“The more you get a real regulatory ecosystem developing around bitcoin and other currencies, the more other types of investors are going to be comfortable coming in, that's going to bring the liquidity, that's going to reduce the volatility,” the Bridgewater executive said.
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