Paul Tudor Jones is a billionaire hedge fund manager. As he is geared for profit maximization, news that he is buying Bitcoin has hit mainstream media while his real interest is in Bitcoin futures which is a very different investment altogether.
So OTC, Spot, Derivatives, What’s The Difference After All?
Bitcoin draws value from its scarcity and qualifies as a store of value, a medium of exchange, and a unit of account divisible to eight decimal places. Only that miners will shut you out for any amount beyond five decimal points.
- SPOT
Bitcoin can be acquired either through spot exchanges where one has to register and buy through a centralized ramp as Binance, Coinbase, or even Bitfinex, through a decentralized exchange, or through over-the-counter (OTC) exchange.
Trading via the former means amounts can be tracked since exchange’s order books are public and can be monitored. The larger the amounts, the more the buy or sell walls and the more the FOMO or JOMO.
- OTC
On the contrary, OTC exchanges can be private and exchange rates negotiated to compensate for slippage. Purchases through these media are private as well and there are tons of providers.
Here, it is common for BTC to be bought in bulk without the worry big purchases will affect prevailing exchange rates subsequently affecting the amount bought or sold.
In Paul’s case, however, investors prefer his fund to purchase Bitcoin futures.
- Futures/derivatives
These are derivatives where contracts, not individual coins, are traded.
In this arrangement, his fund while not holding physical coins through a vetted custodian, will bet on BTC prices and profit (or make losses) depending on their prognosis.
Assuming Tudor BVI makes pours one percent of their $38 billion into Bitcoin Futures, $380 million will be poured into the ecosystem, a significant boost for buyers if bids are made, or insurmountable pressure if bets are negative, and the coin’s overall liquidity. It is not clear whether Tudor BVI has already made purchases.
Bitcoin is the Fastest Horse and Hedge Funds may Follow Paul’s Move
Tudor BVI’s forays into the crypto and Bitcoin world is net positive and could lead to other hedge funds assigning part of their multi-billion funds to Bitcoin and another promising crypto with rewarding results.
1/ NEW @BitwiseInvest Paper on Bitcoin in a 60/40 portfolio.
TLDR: Historically, there's no *wrong* time to invest!
If you held for 3 years & rebalanced, BTC boosted returns *regardless of when* you bought!
Even if you bought in Dec 2017!https://t.co/Hh4GoE6CEB
Thread — pic.twitter.com/IzcEKPTBQQ
— Bitwise (@BitwiseInvest) May 6, 2020
Already, Paul admits that crypto is this era’s fastest horse and his bet is on Bitcoin, a digital asset which now competes with gold as a safe haven.
