Bitcoin could become ‘digital gold’ if volatility and liquidity issues subside with ‘regulatory certainty’, Bridgewater says

  • Bridgewater’s Director of Investment Research told Bloomberg on Wednesday that bitcoin could become “digital gold.”
  • “As institutional investors, we don’t know yet if it’s going to be digital gold, it may be over time, but I don’t think we can say that with confidence yet,” Patterson said.
  • Patterson argued that with more “regulatory certainty”, volatility and liquidity issues may subside.

Bitcoin could become “digital gold” if volatility and liquidity issues subside with “regulatory certainty,” according to Bridgewater’s director of investment research Rebecca Patterson.

Patterson sat down with Bloomberg on Wednesday to discuss her firm’s investment strategy, and the topic of bitcoin quickly came up.

The director said she “wouldn’t call bitcoin an alternative currency” and argued that, if anything, the better comparison is to gold.

Patterson noted she believes bitcoin has the potential to become “digital gold” in the future, but current regulatory, volatility and liquidity issues have kept Bridgewater away for now.

“As institutional investors, we don’t know yet if it’s going to be digital gold, it may be over time, but I don’t think we can say that with confidence yet,” Patterson said.

She highlighted bitcoin’s value to investors as a hedge against fiat currency inflation in the interview.

“It is something that investors have been looking to as they worry about fiat currencies being devalued by all this central bank printing,” she said.

When asked what the trigger would be that would signify bitcoin is in fact “digital gold,” Patterson said there isn’t “one green light” for Bridgewater, but there are a few things the firm is looking for.

First, Bridgewater needs to see lower volatility. Patterson said, “right now bitcoin can move 10% on a tweet, that’s not exactly a store of wealth for most institutional investors.” She also noted bitcoin’s volatility is still double that of the Venezuelan Bolivar.

Second, the firm wants to see greater liquidity and Patterson argued this liquidity may come from “regulatory certainty.”

Unlike many other analysts and investors, Patterson doesn’t see regulation as bitcoin’s downfall.

“The more you get a real regulatory ecosystem developing around bitcoin and other currencies, the more other types of investors are going to be comfortable coming in, that’s going to bring the liquidity, that’s going to reduce the volatility,” the director said.

In a tweet last Sunday, Michael Burry, who rose to fame after being portrayed in ‘The Big Short’, said nearly the opposite.

Burry argued bitcoin’s “long-term future” is “tenuous” because of regulatory risk.

The Scion Asset Management chief said in a tweet, “legally violent, heartless centralized governments with #lifeblood interests in monopolies on currencies” won’t allow bitcoin to thrive and remain decentralized in the long-term.

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