Ruffer
Dogecoin frenzy forces UK fund manager to offload $1.1 billion Bitcoin stash
Ruffer revealed on Tuesday that it had sold its $600M position for $1.1B, citing concerns over excessive speculation across the cryptocurrency market.
United Kingdom-based fund manager Ruffer liquidated its $600M Bitcoin bet after growing nervous about the speculative frenzy in the cryptocurrency market, including huge rallies in meme-based tokens like Dogecoin (DOGE).
The fund, which manages roughly $34 billion for wealthy clients and charities, started selling its cryptocurrency stash in December 2020, when the BTC/USD exchange rate rose towards $25,000, the Sunday Times reported.
It continued selling as the pair established newer highs in January 2021, breaking past the $40,000-level. Ruffer winded up its remaining Bitcoin position by April, netting $1.1 billion in profits from the sales, or a 83% return for the fund.
Dogecoin FUD
Ruffer's sequential Bitcoin dumps appeared in moments that saw analysts predicting greater valuations for the flagship cryptocurrency. For instance, JPMorgan said in a report published January that BTC/USD could rise to $146,000 as it competes with gold to become the world's leading inflationary hedge.
Guggenheim Partners' Chief Investment Officer Scott Minerd also called for a $400,000-$600,000 Bitcoin, believing that the cryptocurrency would be able to mousetrap gold's market in the long run.
Ruffer clarified that it would consider repurchasing Bitcoin as an insurance against inflation, with its investment director Duncan MacInnes telling the Financial Times that they would be assessing the markets "from the sidelines than from in the trenches."
But for now, MacInnes agreed, Bitcoin is too hot to hold especially when Dogecoin, a joke-based cryptocurrency, is valued at $40 billion. He said:
"It's hard to say the froth has come out."
Dogecoin, a satirical homage to Bitcoin, underwent a wild upside rally in 2021 as it rose 15,337% year-to-date at one point in time.
Supportive tweets from Tesla CEO Elon Musk emerged as some of the leading catalysts behind the Dogecoin price rally, including reshared July 2020 meme showing the cryptocurrency storming the global financial system.
It’s inevitable pic.twitter.com/eBKnQm6QyF
— Elon Musk (@elonmusk) July 18, 2020
But the retail frenzy started dying in May after Musk called Dogecoin a "hustle" on a Saturday Night Live episode. The billionaire entrepreneur's U-turn on the token caused panic selling across the cryptocurrency market, hinting that loss-making traders attempted to cash out gains from still-profitable cryptocurrencies like Bitcoin.
Dogecoin fell 30% instantly after Musk's statement. As of June 9, the cryptocurrency was trading more than 50% lower than its all-time high of $0.76.
“You could see very clearly that there was a rise in speculative behavior," said MacInnes while pointing at Bitcoin's own rise from $30,000 to almost $65,000 amid the Dogecoin retail frenzy. Nevertheless, he added that at least the benchmark cryptocurrency's boom had some rationality behind it.
Bitcoin "on the menu"
Lower-yielding bonds and devaluated fiat currencies left investors without a better traditional safe-haven asset. As a result, their traditional 60/40 portfolio strategy returned nothing, which led them to "new safe-haven, uncorrelated assets" like Bitcoin.
Ruffer has shifted its funds to Bitcoin-rivaling anti-inflation assets, including gold, inflation-protected bonds and commodity stocks. The firm asserted that it would keep the cryptocurrency "on the menu" for future.
Bitcoin sell-off likely played a key role in boosting Gold’s appeal
Investors' appetite for gold increased as they assessed higher inflation and a major price crash in the Bitcoin market.
May was a testing time for cryptocurrencies like Bitcoin (BTC). The flagship digital asset was already wobbling after rallying to nearly $65,000 in mid April, owing to profit-taking sentiment among traders.
Elon Musk accelerated the sell-off by reversing his company's plans to accept Bitcoin as payment for Tesla's electric cars.
Later in the month, the People's Bank of China reiterated to the country's financial institutions against the use of virtual currencies for payments. Chinese authorities are also starting to keep a close eye on crypto mining — the process by which computers mine cryptocurrencies like Bitcoin.
More blows to the cryptocurrency sector came from the U.S. tax and monetary authorities, including Federal Reserve Chairman Jerome Powell, who suggested that more regulations are needed.
All and all, the flurry of negative updates caused the cryptocurrency market to lose more than $500 billion in May. Being the benchmark digital asset, Bitcoin also suffered the brunt of aggressive downside pressure, falling 35.50% in the month.
Meanwhile, physical gold exchange-traded funds (ETFs) recorded its strongest months in May 2021 since September 2020. The funds across the globe attracted a combined total of $3.4 billion compared to September's $4.8 billion, according to data provided by the World Gold Council (WGC).
In detail, U.S.-based gold ETFs experienced an inflow worth $2.1 billion. The European gold ETFs reported $1.6 billion worth of deposits. Nonetheless, Asian funds tracking the precious metal's prices noted an outflow of about $300 million.
Strong demand for gold ETFs also contributed to the rise of its spot prices. As a result, the XAU/USD exchange rate jumped 7.6% in May to $1,912.785 an ounce.
Negative correlation
The polar opposite moves in Bitcoin and Gold markets indicated that a short-term negative correlation has been brewing between them. In addition, Wall Street veterans Nick Colas and Jessica Rabe also wrote in their DataTrek Research report that the sell-off in virtual currencies might have boosted gold's appeal among institutional investors.
The market strategists projected Bitcoin as a riskier alternative to Gold. Meanwhile, they noted that the precious metal's value does not decline by half in five weeks because of Elon Musk tweets, nor does it respond to policymakers' ban threats.
"Gold is, relative to virtual currencies, a no-drama investment. [Therefore], we continue to recommend a 3-5 percent position in gold for diversified portfolios."
Bitcoin is largely a speculative bet for wealthy and small retail investors seeking quick profits. But the fixed supply of BTC has also seen it benefit from fears of rising inflation, similar to gold. Corporates including Tesla, Ruffer Investments, Square, and MicroStrategy added Bitcoin to their cash-ruled balance sheets.
They did so to offset inflation risks brought forth by the Federal Reserve's unprecedented expansionary policies, including near-zero interest rates and a $120 billion monthly asset purchasing program.
The high-profile investments played a key role in doubling Bitcoin prices in the first quarter of 2021, fueled further higher to around $65,000 by mid-April by an increase in debt-fueled leveraged bets and influx of new retail traders into the market.
On the other hand, Gold ETFs reported six months of back-to-back outflows until May 2021. JPMorgan analysts in January 2021 reported that gold ETFs lost about $7 billion in the same period Grayscale Bitcoin Trust (GBTC), a trust operated by New York-based Grayscale Investments, attracted $3 billion.
The lack of capital injection into precious metal funds also lowered its spot bids; XAU/USD closed the first 2021 quarter down 10.14% opposed to Bitcoin's 100% returns.
In May 2021, another JPMorgan report suggested that large institutional investors secured their profits in Bitcoin to seek opportunities in gold. They cited open interest data in Bitcoin futures contracts on the Chicago Mercantile Exchange that experienced its biggest drop since October 2020. JPMorgan analysts said:
“The bitcoin flow picture continues to deteriorate and is pointing to continued retrenchment by institutional investors."
The statements also appeared as Ruffer Investments, a U.K.-based fund that manages about $33.95 billion for wealthy individuals and charities, also announced Tuesday that it has unloaded its entire Bitcoin position and has netted $1.56 billion in profits.
Duncan MacInnes, investment director at Ruffer, told the Finance Times that they had shifted the funds into gold, commodity stocks, and inflation-protected bonds.
Macinnes added that Bitcoin is still "on the menu" of Ruffer's potential investments in the future, noting that the world is desperate for new safe-haven against ultra-low bond yields.
British Asset Manager Ruffer Bags $1.1 Billion Profit From Bitcoin
British asset management firm Ruffer reportedly said its bitcoin investment has generated about $1.1 billion in profit. The firm says bitcoin has been “a wonderful store of value” and it is still optimistic about the cryptocurrency in the long term. Ruffer Profits $1.1 Billion From Bitcoin Investment London-based asset management firm Ruffer revealed that it […]London wealth manager cashes out $1B profit from $600M BTC buy in November
After profiting $1 billion in less than six months, Ruffer is open to making more Bitcoin trades in the future.
Asset manager Ruffer has profited by more than $1 billion in profit from a $600 million Bitcoin investment it made during November 2020.
Speaking to The Times, investment director at the London-based asset management firm, Hamish Baillie, revealed that Ruffer closed out its Bitcoin position for more than $1.1 billion in profit during April:
“When the price doubled we took some profits for our clients in December and early January. We actively managed the position and by the time we sold the last tranche in April the total profit was slightly more than $1.1 billion.”
Baillie claims Ruffer became one of the first fund managers to buy BTC in what was a rare short-term investment for the company. At the time of the investment, Bitcoin’s price had cleared $15,000 and was pushing up to test the then all-time highs near $20,000 that had been set in 2017.
The investment director attributed Bitcoin’s late 2020 parabolic price rally to the pandemic lockdown and stimulus payouts in the United States. He said the company sold its holdings partly because younger investors would not be spending as much time trading crypto now that lockdowns are ending.
The firm has moved the profits it made on the BTC trade into other “protective” assets such as inflation-linked government bonds. However, Baillie is confident that major financial institutions, including Ruffer and Goldman Sachs, will continue to buy Bitcoin, stating that another purchase is “certainly not off the menu:”
“If you have a multi-asset strategy then things that behave in different ways are really helpful. There’s no point being multi-asset if all your different assets move with the same dynamics.”
Ruffer is not the only large financial institution that has been dabbling in crypto, with data from Bitcointreasuries.org suggesting that 36 publicly traded companies currently hold BTC on their balance sheet.
Only six or 16% of publicly traded firms invested in Bitcoin are currently down on their position, including Nexon, Meitu, and Seetee. The top three holders — MicroStrategy, Tesla, and Square — are sitting on $5.2 billion worth of BTC between them.