Hedge fund manager Hugh Hendry is betting on Bitcoin (BTC) and low interest rates next year.
Hendry said there are “always two tail risks” to short volatility investing strategies, which aim to make money by reducing market volatility by selling options.
“Do you want to buy a call option where Mag-7 is capitalized at 100% of GDP, or do you want to buy a call option where interest rates fall quickly to the floor?
That's why I'm going to keep watching to see what inventory levels look like on the day of the next rate cut. I'm moving the barbell: long BTC and long sub-2% federal funds calls at the end of 2025.
Of course, I am subject to tracking errors where some idiosyncratic news causes stocks to skyrocket and Bitcoin to stay flat or fall. I'm happy to take that risk. ”
Mag-7 refers to the “Magnificent Seven” technology stocks: Alphabet (GOOGL; GOOG), Amazon (AMZN), Apple (AAPL), Meta Platform (META), Microsoft (MSFT), NVIDIA (NVDA), and Tesla (TSLA)).
Hendry also compared Bitcoin's size to Invesco QQQ, an exchange-traded fund (ETF) based on the Nasdaq 100 index.
“BTC is a fantasy for everyone, for better or for worse. In fact, its MASS makes it irrelevant to this discussion, but it is very attractive to consider on the upside. In Newton’s cradle game, Today, MASS is the most important and outlier.
BTC has a market capitalization of just $1 trillion. QQQ is $42 trillion. So Q, or rather Mag-7's $13 trillion is the only consideration. When it comes to bank stock lending, the robustness of its valuation is of paramount importance. If that melts away and trust collapses, huge margin calls will occur.
That probably won't happen, but if I were a bank I would be cautious about the amount of that collateral. I would be trying to counter-cyclically reduce my assets, the markets, and their liquidity capacity. Monetary here means that the collateralized assets are similar to short-term securities. T-Bills will not lose 83% of their value over the next 18 months.
At this vaunted level relative to GDP, Vaal stocks regularly suffer such reversals. ”
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Disclaimer: The opinions expressed on The Daily Hodl do not constitute investment advice. Investors should perform due diligence before making high-risk investments in Bitcoin, cryptocurrencies, or digital assets. Please note that transfers and transactions are made at your own risk and you are responsible for any losses you may incur. The Daily Hodl does not recommend buying or selling any cryptocurrencies or digital assets. The Daily Hodl is also not an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
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