Ruffer’s 500% Bitcoin Profit: Know When To Hodle Them, Know When To Fold Them

“You have to know when to hold them, know when to fold them.”

Many bitcoin investors wish they had paid attention to the famous lyrics by Kenny Rogers from The Gambler over Easter.

For the first four months or so of the year, the leading cryptocurrency couldn’t hurt, but it’s a very different story since bitcoin peaked at $64,829 in mid-April, according to Coindesk.

This week, bitcoin briefly dipped below $30,000 for the second time in a month — a painful watch for anyone who mentally made gains in April and is now about 50 percent lower.

‘You need to know when to hold them, know when to fold them’: Bitcoin investors may wish they had heard the famous lyrics to Kenny Roger’s song The Gambler

It should be noted, as I’ve said before here, that bitcoin investors are a diverse company and many don’t necessarily have the same attitudes to risk and reward as traditional investors — and may be more pleased with high-octane moves in the percent price. treaties.

Some will be the true believers, who support bitcoin as the future and claim that they are thinking ten or twenty years ahead and not about what has happened since we called in 2021.

A bigger chunk (and cross section) are longer term bitcoin holders, who may have a headache from the fall but are significantly higher than their initial investment, having bought less than $10,000.

The real winners came in early—or in a crash moment—buying in less than $5,000 or even $1,000.

Still, it’s never fun to look at a chart with the rose-colored glasses in retrospect and think, ‘Yeah, it was blindingly clear that this was ripe for a fall, I should have taken some profit.’

So investment trust Ruffer’s latest annual report will be a tough one for many bitcoin investors to read — even those who are still sitting on paper profits in the multiples.

Describing itself as all-weather, this trust can invest in pretty much anything it wants and make headlines late last year when it was found to have taken a sizable bitcoin position.

In perhaps the smartest or happiest bit of daring active management of recent times, Ruffer bought bitcoin and some bitcoin proxies in November when the cryptocurrency traded below $10,000. It sold half that amount in January, after rising to $30,000, then cashed in in full near its peak in April, making more than 500 percent gains.

About knowing when to keep them, know when to fold them.

Ruffer's investment manager's report featured this chart charting bitcoin's rise and fall, the key high-profile events for the cryptocurrency, and where it bought and sold

Ruffer’s investment manager’s report featured this chart charting bitcoin’s rise and fall, the key high-profile events for the cryptocurrency, and where it bought and sold

Other than saying “lucky gits,” this sparked some amusement in the discussion in the This is Money offices, as Ruffer’s initial investment rationale was bitcoin’s long-term prospects for adoption by the financial and institutional mainstream and emergence as digital gold.

So, in an investment world where we are regularly advised to think long-term, what’s up with this bit of short-term trading?

Ruffer’s Investment Manager’s Year End Review explains. It said: “The rationale was that bitcoin was an emerging store of value and that institutional investors would start using it as a ‘digital gold’. This story played out faster than we could have anticipated, as can be seen in the chart below.

Bitcoin may still be fulfilling its potential, but the market has shown many signs of foam – retail speculation, excessive leverage, the Coinbase IPO, Tom Brady’s laser eyes, Dogecoin, Elon Musk hosting Saturday Night Live, $60 million non-fungible tokens (NFTs) etc.

Excess liquidity has a wonderful way of bringing the hopes of the future into the prices of the present

At least in the short term, bitcoin exhibited the characteristics of a risky, speculative asset and therefore no longer fulfilled the portfolio role we intended it to be as a protective and diversifying asset. We sold all of our exposure in April (+515 basis points performance contribution).

“Our Chief Investment Officer, Henry Maxey, suspected that excess liquidity is a wonderful way to bring hope for the future into the prices of the present.”

The latter is perhaps the most important lesson for investors, whether they are interested in bitcoin or disinterested in cryptocurrencies.

Just like borrowing debt from the future, in the sense that you take money now in exchange for paying it back and paying more later, a huge wave of cheap money sloshing around can borrow investment returns from months or years to come.

When money flows into the markets, as with crash-fighting rate cuts, quantitative easing and other stimulus measures, players are less concerned about carefully considering where it’s going and are more likely to pay for what’s going up.

There have been some spectacular momentum trades in the rebound from the coronavirus crash: the most notable were bitcoin, Tesla and the Faang stocks, but other stocks have also flown to the moon.

Some of the increase will be justified, but rest assured that for many, the price today has lent a little bit of hope that would have justified gains in the future.

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