Ruffer Says it Sold Bitcoin to “Eschew the Mania”

Key Takeaways

  • Ruffer said it was no longer interested in cryptocurrency, calling the investment class to be a “speculative bubble.”
  • In April 2021, Ruffer sold off all its Bitcoin holdings after investing last year, locking a profit of $1.1 billion.
  • Ruffer said that Bitcoin no longer fulfills the role of a diversifying asset.

Share this article

Ruffer has said that Bitcoin no longer fills the role of a diversifying asset for the firm and called the current cryptocurrency market a “speculative bubble.”

Ruffer Details Billion-Dollar Bitcoin Trade

Ruffer has described the cryptocurrency market as a “speculative bubble” while explaining its decision to sell its Bitcoin holdings in April 2021.

In a year-end review addressed to shareholders, the company wrote:

“Bitcoin may yet fulfill its potential, but the market displayed many signs of froth—retail speculation, excessive leverage.”

The statement comes after Ruffer made a fortune on its Bitcoin trade. In April 2021, Ruffer sold off all its Bitcoin holdings, locking a profit of $1.1 billion.

SIMETRI Research

Ruffer managed $30 billion in assets under management as at 30 Jun. 2021, serving more than 6,000 investors including institutions, family offices, pension funds, and charities around the world.

Last year, the firm made a $744 million allocation to Bitcoin. It described its mammoth sale as a “well-timed exit” that helped avoid giving back its crypto gains in the recent market sell-off. The firm also sold off its exposure in two companies in the cryptocurrency sector, MicroStrategy and Galaxy Digital, saying there was no place for cryptocurrency in its portfolio.

The investment company said that while exposure to Bitcoin was a “significant contributor” to its yearly performance, it soon found that the asset’s price performance may have been driven by speculation. Bitcoin soared throughout late 2020 and early 2021, peaking at around $64,000 in April.

According to Ruffer, the market was overtaken by events such as “Tom Brady’s laser eyes, Dogecoin, Elon Musk hosting Saturday Night Live” that fueled a retail-driven bubble in the asset class.

The firm’s decision to cut its Bitcoin exposure was also based on its long-term approach of avoiding investing in assets that it considers as speculative bubbles. Outlining the decision to reduce its Bitcoin exposure, it said:

SIMETRI Research
Blockone Settlement

“When we see bubbles forming, our approach has always been to eschew the mania. We owned no tech stocks in 2000 and we owned no banks or property stocks in 2008.”

Ruffer’s statements are a possible indicator that as global equities, real estate, and cryptocurrencies experience through high levels of volatility, many large institutional investors may be looking for more conservative bets. Last week, BlackRock CEO Larry Fink claimed that he had seen “very little” demand for Bitcoin and other cryptocurrencies from traditional investors.

Ruffer added that when Bitcoin started showing signs of being a speculative asset, it no longer fulfilled the role of a diversifying asset that it had previously intended it to be.

While Bitcoin is often lauded as a hedge against inflation, the 12-year old asset is still considered risky in more traditional investment circles, particularly due to its volatile nature. Hence, in the face of being a speculative asset, Bitcoin may lose some of its appeal as a diversification play.

Share this article


Tagged : / / / /

Dogecoin frenzy forces UK fund manager to offload $1.1 billion Bitcoin stash

United Kingdom-based fund manager Ruffer liquidated its $600M Bitcoin bet after growing nervous about the speculative frenzy in the cryptocurrency market, including huge rallies in meme-based tokens like Dogecoin (DOGE).

The fund, which manages roughly $34 billion for wealthy clients and charities, started selling its cryptocurrency stash in December 2020, when the BTC/USD exchange rate rose towards $25,000, the Sunday Times reported.

It continued selling as the pair established newer highs in January 2021, breaking past the $40,000-level. Ruffer winded up its remaining Bitcoin position by April, netting $1.1 billion in profits from the sales, or a 83% return for the fund.

Dogecoin FUD

Ruffer’s sequential Bitcoin dumps appeared in moments that saw analysts predicting greater valuations for the flagship cryptocurrency. For instance, JPMorgan said in a report published January that BTC/USD could rise to $146,000 as it competes with gold to become the world’s leading inflationary hedge.

Guggenheim Partners’ Chief Investment Officer Scott Minerd also called for a $400,000-$600,000 Bitcoin, believing that the cryptocurrency would be able to mousetrap gold’s market in the long run.

Ruffer clarified that it would consider repurchasing Bitcoin as an insurance against inflation, with its investment director Duncan MacInnes telling the Financial Times that they would be assessing the markets “from the sidelines than from in the trenches.”

But for now, MacInnes agreed, Bitcoin is too hot to hold especially when Dogecoin, a joke-based cryptocurrency, is valued at $40 billion. He said:

“It’s hard to say the froth has come out.”

Dogecoin, a satirical homage to Bitcoin, underwent a wild upside rally in 2021 as it rose 15,337% year-to-date at one point in time.

Supportive tweets from Tesla CEO Elon Musk emerged as some of the leading catalysts behind the Dogecoin price rally, including reshared July 2020 meme showing the cryptocurrency storming the global financial system.

But the retail frenzy started dying in May after Musk called Dogecoin a “hustle” on a Saturday Night Live episode. The billionaire entrepreneur’s U-turn on the token caused panic selling across the cryptocurrency market, hinting that loss-making traders attempted to cash out gains from still-profitable cryptocurrencies like Bitcoin.

Dogecoin fell 30% instantly after Musk’s statement. As of June 9, the cryptocurrency was trading more than 50% lower than its all-time high of $0.76.

Dogecoin’s classic head & shoulders pattern suggests massive declines ahead. Source: TradingView

“You could see very clearly that there was a rise in speculative behavior,” said MacInnes while pointing at Bitcoin’s own rise from $30,000 to almost $65,000 amid the Dogecoin retail frenzy. Nevertheless, he added that at least the benchmark cryptocurrency’s boom had some rationality behind it.

Bitcoin “on the menu”

Lower-yielding bonds and devaluated fiat currencies left investors without a better traditional safe-haven asset. As a result, their traditional 60/40 portfolio strategy returned nothing, which led them to “new safe-haven, uncorrelated assets” like Bitcoin.

Bitcoin struggles to reclaim previous support waves (green and orange). Source: TradingView

Ruffer has shifted its funds to Bitcoin-rivaling anti-inflation assets, including gold, inflation-protected bonds and commodity stocks. The firm asserted that it would keep the cryptocurrency “on the menu” for future.