Warburton Global Macro Fund is enjoying the fruits of bitcoin even though its hedge fund manager thinks the currency is ‘too volatile to trade.’
Founded in 2015, the Australian hedge fund is considered one of the best performing in the industry.
The Perth-based company, which began trading in April 2016, has been trading between bitcoin prices in Europe and North America before selling in Asia where demand is higher.
Speaking to The Australian Financial Review, Leon Warburton, portfolio manager of Warburton Global Macro Fund, explained that they were able to get on board early to spread trading between different exchanges.
As a result, the fund achieved a six percent spread and added five percentage points to the fund’s returns.
Yet, despite the profits the company is making, Warburton is not a long-term believer in bitcoin. One of the issues he has regards the slow speed and high cost of transactions. Unless people are willing to pay a sum of money, transfers can often take hours or days to process, he said.
Because we were getting six to eight percent spreads we were prepared to pay a big premium to get our trades done at the speed of an email, but it’s just become so congested.
Additionally, of the 25 million who own bitcoin, Warburton says that most ‘are hoarders’ who simply treat the currency as a store of value rather than trading with it.
It’s very sentiment driven. I don’t think it will ever become a medium of exchange – it will become like quasi gold.
Taking a Punt
According to Warburton, bitcoin remains too volatile to trade. Yet, he says by taking a basic view of the currency, it would be whether ‘it’s going to cannibalise the gold market.’
At present, gold is valued at $7 trillion. Whereas, the digital currency market is worth $138.4 billion, according to CoinMarketCap.
Yet, if the U.S. Securities and Exchange Commission (SEC) eventually approves an ETF, it may push bitcoin’s price up to $20,000 or $25,000, says Warburton. This is where bitcoin would ‘cannibalise’ five percent of the gold market.
A lot of people suggest you hold one percent of your net worth [in bitcoin] and it will either go to zero or $500,000 [a coin] if you are willing to lose one percent of your portfolio and take a punt that it could add $1 million to $2 million to your wealth you may as well do it.
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Last modified: March 4, 2021 5:00 PM