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Cryptocurrency is a ‘pure trading instrument’, says hedge fund CEO

Not all hedge fund managers are sold on crypto as Man Group CEO Luke Ellis compared cryptocurrencies to tulip bulbs.

Speaking to the Financial Times, Ellis commented that the usefulness of crypto comes from its volatility, thus presenting the asset class as a viable trading opportunity. According to the CEO of the world’s largest publicly traded hedge fund:

“If you look at the cryptocurrency as a whole, it is a pure trading instrument. There is no inherent value in it. It is a tulip bulb.”

Despite being an age-old comparison, crypto and bitcoin (BTC), in particular, are often compared to “tulipmania” – a brief period where the price of some tulip bulbs rose sharply in the Netherlands before eventually crashing.

Ellis said his $127 billion hedge fund is happy to trade crypto because of the liquidity to support long or short bets given the volatile price action of cryptocurrencies. For Ellis, the crypto involvement of Man Group does not constitute an endorsement of cryptocurrencies as an asset class.

According to the CEO of Man Group, the hedge fund does not offer crypto as an “asset management product,” but it is one of the more than 800 markets in which the company trades.

Commenting on the prevailing crypto investment thesis, Ellis identified inflation as a major reason that cryptocurrencies are becoming more popular in asset portfolios.

Indeed, supporters of bitcoin say that BTC provides a hedge against inflation and monetary weakness, especially amid ongoing economic recovery efforts around the world as part of efforts to combat the COVID-19 pandemic.

Connected: Hedge funds see crypto market decline as an investment opportunity

Ellis’ comment comes as more hedge funds are becoming active in the crypto investment space. In early June, Cointelegraph reported that US hedge fund managers expect to hold more than 10% of their assets in cryptocurrencies.

The bitcoin and crypto market’s decline of over 50% since May has been identified as an investment opportunity for big-money players in anticipation of a return to parabolic price movements by the end of the year.

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