In a recent Bloomberg TV interview, Bridgewater’s Director of Investment Research, Rebecca Paterson gave her opinion on what it would take for Bridgewater to seriously consider Bitcoin as digital gold and start allocating clients’ money into the asset.
Paterson mentioned the need for lower volatility as the first condition for such consideration. Bitcoin has always been high in volatility as last week’s price fluctuation has demonstrated. High volatility does not create a good store-of-wealth for institutional investors who often demand consistent low-beta appreciation for gold-like assets.
Next, Paterson prefers greater liquidity for Bitcoin. The current liquidity for gold liquidity is around US$150 billion versus Bitcoin’s daily bitcoin liquidity of US$50 billion. At today’s Bitcoin price, its market cap is shy of $1 trillion versus gold’s market cap of more than US$10 trillion. Greater liquidity is needed in order for pension funds, sovereign wealth funds and more to consider Bitcoin as a diversifier in their investment mandate.
Lastly, Paterson indicated the need for greater regulatory certainty in how Bitcoin is treated by central banks and governments. With greater certainty, it would attract more institutions and increase liquidity. This would in turn reduce volatility as large holders are known to hold on to their investments for a longer period of time.
At the rate which Bitcoin is growing, it seems a matter of not if, but when all the above conditions would soon satisfy Bridgewater’s criteria.