Crypto has ‘no intrinsic value’ but is good to trade – hedge fund boss

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Company

Jul 26, 2021 5:45 AM 3 minutes to read

Luke Ellis says digital currencies are “things to be traded because they go up and down a lot.” Photo / 123RF

The chief executive of Man Group, the world’s largest hedge fund manager, said cryptocurrencies have “no intrinsic value” but create business opportunities for his company due to their insane price swings.

Comments by Luke Ellis in an interview with The Financial Times highlight an irony in today’s cryptocurrency trading, much of the market action involves participants who doubt their ultimate usefulness.

“If you look at cryptocurrencies as a whole, this is a pure trading instrument. There is no intrinsic value. It’s a tulip bulb,” Ellis said, referring to the flower which became the center of interest of a 17th century Dutch financier. mania.

The London-based Man Group, which manages US $ 127 billion ($ 182.2 billion) for its clients, is known to use quantitative models that seek to take advantage of price anomalies and market trends. Ellis said cryptocurrency was one of “probably 800 markets we trade today in addition to 15,000 stocks and thousands of credits.”

“We like to be long and short based on what the models say that is likely to come into the market and we will trade it long and short just as happily and in as large a size as the market liquidity allows you to trade.” , did he declare. “We trade from S&P futures to sushi rice futures. “

But Ellis said that just because Man Group deals with cryptocurrencies doesn’t mean that they are “an asset management product,” in which funds “deliver value” by owning an asset for investors. . He said cryptocurrencies were “things to trade because they go up and down a lot.”

Like many in the financial world, Ellis believes in the potential of the blockchain technology underlying cryptocurrencies to increase the efficiency of payment systems. But he takes issue with the idea that the tokens themselves will forever be “a limited supply instrument”.

“You can have an endless number of different cryptocurrencies,” he said. “Anyone can start another one any day.”

Despite all his doubts about the value of cryptocurrencies, Ellis is empathetic about the motivation of investors who have turned rightly or wrongly to these assets as a potential hedge against inflation.

“The main thing that worries customers is inflation,” he said, adding that he expected such concerns to persist.

“I think we stay in a world of very low rates until the central banks lose control and when they lose control it’s not going to be fun,” he said. “For some of the strategies that we’re trading, we could do very well. But that doesn’t mean it’s a good thing.”

Written by: Gary Silverman

Financial Time

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