Soros Fund Management, the investment firm led by well-known billionaire and philanthropist George Soros, gave the green light to Bitcoin (BTC) trading earlier this year. The firm's Chief Investment Officer Dawn Fitzpatrick said the firm was investing in Bitcoin and in the infrastructure around it.
The fund may have opened the doors to crypto, but -- aside from comments made in Davos a few years ago -- Soros has played his crypto cards close to his chest. Here's what we know about his views on Bitcoin.
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Who is George Soros?
George Soros is famous for his success as an investor, and for his charitable contributions. In 2017 he gave $18 billion -- 80% of his wealth -- to Open Society Foundations, a network of human rights and justice groups.
Soros is regularly dubbed "the man who broke the Bank of England" because back in 1992 he made $1 billion by shorting the British pound. Short selling allows investors to profit when the price of an asset goes down.
One reason people want to know what Soros thinks about the ever-evolving world of digital currencies is that the 91-year-old has earned a reputation as the premier currency speculator in the world. Another reason is a fear that he and his firm might go short on Bitcoin, which is essentially betting that the leading cryptocurrency will lose value.
What Soros has said about Bitcoin
When he addressed the World Economic Forum in Davos in January 2018, Soros described Bitcoin as a "typical bubble." He compared the cryptocurrency industry to the tulipmania that gripped The Netherlands in the 1600s.
His main concern? Volatility. "Bitcoin is not a currency," he said, "because a currency is supposed to be a stable store of value, and a currency that can fluctuate 25% in a day can't be used, for instance, to pay wages. Because the wages could drop by 25% in a day."
However, he also saw the potential in blockchain technology, which he labeled "innovative." Warning that blockchain tech could be used for both good and bad, Soros highlighted a positive use case. "We use it actually in helping migrants to communicate with their families and to keep their money safe and carry it with them," he said.
Most recently, his investment firm decided it would invest in Bitcoin, but Soros himself did not comment.
Why Soros Fund Management will trade crypto
Speaking to Bloomberg Front Row in March, Fitzpatrick said, "We think the whole infrastructure around crypto is really interesting, and we've been making some investments into that infrastructure." By infrastructure, she's referring to everything from cryptocurrency exchanges to asset management and crypto tax reporting.
She explained that the interest in cryptocurrencies has been fueled by deflation. "Something like Bitcoin might have stayed a fringe asset, but for the fact that over the last 12 months we've increased money supply in the U.S. by 25%," Fitzpatrick said.
Like many investors, Fitzpatrick views Bitcoin as a commodity rather than a currency -- she points out that it is storable, transferable, and has a finite supply. Indeed, the CIO thinks Bitcoin has succeeded in taking some of the market away from gold.
Fitzpatrick warned that Central Bank Digital Currencies (CBDCs), or GovCoins, could threaten Bitcoin, at least in the short term. CBDCs are government-backed digital currencies that are built on the blockchain. They are essentially digital versions of traditional currencies like the U.S. dollar.
China has been piloting a digital yuan for some time, and the Federal Reserve is considering the pros and cons of a digital dollar. CBDCs offer some of the benefits of cryptocurrencies, such as fast and cheap payment processing -- but without the volatility or risk. But because they are centralized, there are privacy and security concerns that may be difficult to overcome.
No longer a fringe asset
A lot has changed since 2018. More and more retailers accept cryptocurrency as a form of payment, and a recent Bakkt survey showed that 48% of Americans had bought cryptocurrency.
If you're considering following Soros Fund Management and buying Bitcoin, make sure you understand the risks and only invest money you can afford to lose. Cryptocurrency investing can generate high rewards, but it could also lead to heavy losses.
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October 12, 2021 at 06:32PM
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What George Soros Says About Bitcoin - Motley Fool
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