Ruffer Says it Sold Bitcoin to "Eschew the Mania"

Key Takeaways

• Ruffer said it was no longer interested in cryptocurrency, calling the investment class to be a “speculative bubble.”
• In April 2021, Ruffer sold off all its Bitcoin holdings after investing last year, locking a profit of $1.1 billion.
• Ruffer said that Bitcoin no longer fulfills the role of a diversifying asset.

Ruffer has said that Bitcoin no longer fills the role of a diversifying asset for the firm and called the current cryptocurrency market a “speculative bubble.”

Ruffer Details Billion-Dollar Bitcoin Trade

Ruffer has described the cryptocurrency market as a “speculative bubble” while explaining its decision to sell its Bitcoin holdings in April 2021.

In a year-end review addressed to shareholders, the company wrote:

“Bitcoin may yet fulfill its potential, but the market displayed many signs of froth—retail speculation, excessive leverage.”

The statement comes after Ruffer made a fortune on its Bitcoin trade. In April 2021, Ruffer sold off all its Bitcoin holdings, locking a profit of $1.1 billion.

Ruffer managed $30 billion in assets under management as at 30 Jun. 2021, serving more than 6,000 investors including institutions, family offices, pension funds, and charities around the world.

Last year, the firm made a $744 million allocation to Bitcoin. It described its mammoth sale as a “well-timed exit” that helped avoid giving back its crypto gains in the recent market sell-off. The firm also sold off its exposure in two companies in the cryptocurrency sector, MicroStrategy and Galaxy Digital, saying there was no place for cryptocurrency in its portfolio.

The investment company said that while exposure to Bitcoin was a “significant contributor” to its yearly performance, it soon found that the asset’s price performance may have been driven by speculation. Bitcoin soared throughout late 2020 and early 2021, peaking at around $64,000 in April.

According to Ruffer, the market was overtaken by events such as “Tom Brady’s laser eyes, Dogecoin, Elon Musk hosting Saturday Night Live” that fueled a retail-driven bubble in the asset class.

The firm’s decision to cut its Bitcoin exposure was also based on its long-term approach of avoiding investing in assets that it considers as speculative bubbles. Outlining the decision to reduce its Bitcoin exposure, it said:

“When we see bubbles forming, our approach has always been to eschew the mania. We owned no tech stocks in 2000 and we owned no banks or property stocks in 2008.”

Ruffer’s statements are a possible indicator that as global equities, real estate, and cryptocurrencies experience through high levels of volatility, many large institutional investors may be looking for more conservative bets. Last week, BlackRock CEO Larry Fink claimed that he had seen “very little” demand for Bitcoin and other cryptocurrencies from traditional investors.

Ruffer added that when Bitcoin started showing signs of being a speculative asset, it no longer fulfilled the role of a diversifying asset that it had previously intended it to be.

While Bitcoin is often lauded as a hedge against inflation, the 12-year old asset is still considered risky in more traditional investment circles, particularly due to its volatile nature. Hence, in the face of being a speculative asset, Bitcoin may lose some of its appeal as a diversification play.

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