Paul Tudor Jones said it best:
“The depth and magnitude of the economic drop-off took modern monetary theory — or the direct monetization of massive fiscal spending — from the theoretical to practice without any debate. It has happened globally with such speed that even a market veteran like myself was left speechless. Just since February, a global total of $3.9 trillion (6.6% of global GDP) has been magically created through quantitative easing. We are witnessing the Great Monetary Inflation (GMI) — an unprecedented expansion of every form of money unlike anything the developed world has ever seen.”
The landmark note to investors released yesterday by legendary hedge fund manager Paul Tudor Jones is the biggest event for Digital Assets so far in 2020, in our view.
Our thesis is this: Bitcoin is the preferred asset to hold in a hyper-inflationary environment and is vastly superior to Gold. While they both should perform well in this environment, Bitcoin simply has so much positive “tech” optionality that we advise investors to hold it as a percentage of their portfolio.
We are always looking for attractive spreads for our clients to initiate. While this might be more of a “Macro” trade, we think it is relevant for all market participants. We monitor this spread very closely. We refer to this as the Digital vs Old Economy — or — the “DO” spread.
For less aggressive investors, we always look for spreads. That is why we are so constructive on BTC vs. GLD. We think this trade would best be expressed using CME Futures or Options. Bitooda is an institutional, CFTC/NFA regulated entity and can block both legs using CME Clearport. Clients simply need to have their FCMs permission Bitooda to enter the trades into Clearport.
Implementation
BTC notional 1 Lot (5 BTC) = $50,000, BTC Volatility 80%
Gold motional 1 Lot (100 Oz) = $173,000, Gold Volatility 25%
Equal capital outlay spread trade:
· Buy 7 lots of BTC futures (or ATM calls)
· Sell 2 lots of GC futures (or buy ATM puts)
Risk matching spread trade:
· Commit 25%/80% less capital to the more volatile asset (BTC)
Resulting in (approximately):
· Buy 1 lots of BTC futures (or ATM calls)
· Sell 1 lots of GC futures (or buy ATM puts)
Please reach out if would like to disucss this trade and other potential attractive strategies.
Have a great weekend!
Tim
