- Tudor Jones has bought some $600 million worth of Bitcoin futures contracts
- Futures contracts are cash-settled bets on Bitcoin’s future price
- Wall Street will crash the Bitcoin price when they hit their targets – again
Paul Tudor Jones, the hedge fund billionaire who publicly stated last week that he thought Bitcoin would be one of the best performers in the coming years, has exposed a key misunderstanding in the Bitcoin community regarding Bitcoin futures versus spot buying. While Tudor Jones’ comments on Bitcoin’s fundamentals are bullish, his ownership of so many contracts raises more worries about market manipulation.
Tudor Jones Puts Hundreds of Millions into Bitcoin Contracts
Tudor Jones revealed last week that he had changed his mind on Bitcoin’s fundamentals because of what he calls the “great monetary inflation” – the endless money printing being carried out by the US Treasury in response to the coronavirus pandemic. Jones stated that Bitcoin had a good chance of being the “fastest horse” in the race in the coming years compared to other stocks and commodities, adding that he backs Bitcoin’s potential to the tune of almost 2% of his fund’s assets.
Given that Tudor Investment Corporation has some $38 billion in assets under management, this suggests that Tudor Jones has allocated some $570-$760 million to Bitcoin. This in turn means that Tudor Jones has just snapped over ₿70,000, right? No.
Selective Reading for Permabulls
Jones has been very clear that he has purchased Bitcoin futures contracts, not actual Bitcoin, and there is a very important difference between the two that some who should know better don’t seem to have realized:
To a large fund, this is a tiny allocation that is essentially treated as an “option” – Paul won’t care if price drops 30% from his entry
His bet is BTC will either moon it or $0 eventually
— ๑ ZimbabweFED ๑ (@NoodleofBinance) May 11, 2020
Bang Bang …. Paul Tudor Jones buys Bitcoin.
Welcome the the party 🔥 pic.twitter.com/XWcpUthmtV
— Pomp 🌪 (@APompliano) May 7, 2020
Bitcoin futures are essentially a bet on the future price of Bitcoin, with the contracts settled in cash at their expiry. Bitcoin futures were introduced in late 2017 as a way for the US government to halt the rampant Bitcoin price without getting involved in it directly, a scheme that was revealed by CFTC chairman Christopher Giancarlo in October 2019.
Price Manipulation Worries Will Increase
The problem with Bitcoin futures is that it encourages massive manipulation of an already manipulated market, with big money traders and, now, Wall Street titans able to impact the Bitcoin price to suit their projections via their media sources and more.
Fortunately for Bitcoin holders, Jones is long Bitcoin, which means that, until it reaches his price target, he will likely do nothing to harm its price. Once he has made enough money however, what will he do then? He and the rest of Wall Street will short the Bitcoin market just like they did in 2018 and take it back to where it came from.
You have been warned.