Billionaire trader Paul Tudor Jones made bank in gold. Now he calls Bitcoin the ‘best inflation hedge’

Paul Tudor Jones is heaping praise on Bitcoin.

In a Wednesday appearance of the Invest Like The Best podcast, the billionaire hedge fund manager, who was one of several traders to capitalise on Bitcoin’s near 900% rise in 2020, lauded the top cryptocurrency for its ability to counter inflation.

“Bitcoin is, unequivocally, the best inflation hedge that there is,” he said. “There’s only so much Bitcoin that can be mined.”

Jones' commentary provides a candid glimpse into the financial trader’s thoughts on the top cryptocurrency, and more broadly attitudes among institutional investors.

He’s by far from the only finance heavyweight to endorse Bitcoin.

Blackrock CEO Larry Fink has on multiple occasions advocated for Bitcoin and praised its unique value. He’s previously called it “digital gold” and recommended institutions allocate around 5% to it.

Analysts at several other Wall Street firms, including JPMorgan, Morgan Stanley, and Fidelity, have also recognised Bitcoin’s value as an inflation hedge, although some argue its effectiveness in this regard can be context-specific, and not guaranteed in all environments.

Better than gold?

Jones, now 71, got his start trading commodities in the 1970s.

At age 26, he founded the Tudor Investment Corporation, which focused on making large bets on currencies, interest rates, commodities, and stock indices based on macroeconomic trends. The fund was a roaring success, and returned over 100% annually in its first five years operating.

Drawing from this background, Jones sees Bitcoin’s main competitor as gold, which is widely viewed as a hedge against the inflation of national currencies.

He argues that Bitcoin is better as an inflation hedge because its supply is capped at 21 million. The supply of gold, on the other hand, keeps on growing.

“In terms of it being a great inflation hedge, gold is increasing in supply every year by about a couple of percent,” he said. “Bitcoin — there’s a finite amount that can be mined, it’s decentralised, so in that sense, it has the greatest scarcity value of anything.”

Bitcoin risks

While a Bitcoin fan, Jones is not unaware of the asset’s downsides.

“The problem with it as an inflation hedge is that if you got into a kinetic exchange, there’s clearly going to be cyber warfare. Anything that you have to deal with electronically is going down, including Bitcoin,” he said.

Then there’s the mounting threat of quantum computers, which could theoretically break the encryption that underpins not just Bitcoin, but large swathes of the world’s digital infrastructure.

“Who knows if and when, with AI advancing as fast as it is, that we may actually have quantum computing,” Jones said. “Someone can come in and hack any bank, can hack anything they want to.”

A June report from consulting firm McKinsey & Company predicts that based on the current rate of development, a quantum computer with the ability to threaten Bitcoin could be developed as early as next year.