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Why this fund manager changed his mind on Bitcoin

asx share price reacting to bitcoin represented by hand placing bitcoin in gold piggy bank
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One of the undercurrents in the world of investing over the past year or so has been the rise (or perhaps re-rise) of cryptocurrencies like Bitcoin (CRYPTO: BTC). Yes, markets have spent 11 of the past 12 months rising, usually enthusiastically. The S&P/ASX 200 Index (ASX: XJO) is up roughly 50% since 23 March last year. The US tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) Index is up almost 100% over the same period.

But all of these moves, which are independently very strong by historical standards, pale against what has happened with Bitcoin. Since 23 March last year, the price of Bitcoin has rocketed more than 600% (in US dollar terms). Just last month, the cryptocurrency set a series of new all-time highs, first rising over US$50,000, then US$55,000. It peaked at more than US$57,400 on 12 February. Today, Bitcoin has given up some of those gains, but is still trading for US$49,719 at the time of writing. That’s a level that would have been a new all-time high just a fortnight ago.

Moves like these have naturally elicited new rounds of FOMO, of investors who have thus far stayed off of the Bitcoin train, but can’t bear to keep watching it go up and up. Those investors might find some interest in a report from the Australian Financial Review (AFR) this week.

Fundie: Bitcoin is here to stay

The report is authored by Mark Carnegie, a founding partner of American alternative asset manager M.H. Carnegie & Co. His first line is, “it took too long, but I now believe that crypto is here to stay”.

Mr. Carnegie has enthusiastically come around to Bitcoin and other cryptocurrencies like Ethereum (CRYPTO: ETH) as a “new asset class”. He says his portfolios “have a giant hole in them because they don’t include Bitcoin and Ethereum”.

So what’s changed? Well, it’s the expansion of the global money supply (i.e. money printing) that’s got Cargenie keen on cryptocurrencies:

Hard currency has been around a very long time but there has never been as much of it borrowed or spent as in the past 18 months. Don’t waste your time looking for financial prudence. There isn’t any. Not in any corner of the globe. Nor is there any convincing theory about how we are going to unwind the knot.

Carnegie calls Bitcoin and Ethereum “insurance” against this “abandoning of sound money”. Since Bitcoin and, to a lesser extent, Ethereum, have a finite supply mechanism built in, and cannot be ‘printed’ at will, they are intrinsically resistant to inflation and currency debasement. Carnegie compares them with precious metals like gold and platinum in this regard.

He finishes by stating that:

If you are wondering what all the fuss is about, then ask yourself this: What insurance have I bought against the world’s financial system creating a monetary policy-resistant financial crisis? It might just be that crypto is the vaccine you need.

An interesting perspective on Bitcoin and cryptocurrencies indeed!

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Sebastian Bowen owns Bitcoin and Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Bitcoin. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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