Everyone aboard the Billionaires Bitcoin Bandwagon? Not So Fast, Robinhood Traders

New rush.

Photographer: Chris Ratcliffe / Bloomberg

Now that Bitcoin has reached $ 20,000 for the first time, should you move your hard-earned cash to digital currency? History suggests that caution should be your motto, no matter how strong the fear of missing out may be.

News on Wednesday that One River Asset Management has established a fund company that will about $ 1 billion in Bitcoin and fellow digital currency Ether by early next year suggests that institutional investors are starting to take cryptocurrencies more seriously.

There is obviously serious money involved. CEO Eric Peters told our Bloomberg News colleague Erik Schatzker that billionaire hedge fund manager Alan Howard is buying a stake in the new business, called One River Digital Asset Management.

But before you race to open a digital wallet, look back to what happened to Bitcoin the last time it went to these levels. A 1,000% surge in 2017 took its value to $ 19,000. A year later, it had dropped to less than $ 3,500.

Have We Viewed This Film Before?

Bitcoin has a history of flattening to deceive

Source: Bloomberg

Hedge fund managers can afford to dabble in crypto. The language that Peters used to describe the trade is the talking stuff of a macro-hedge shop, such as the “convexity” of changing trades that soar in relation to other indicators such as interest rates. That reminds someone of other wealthy investors climbing aboard the bandwagon, like Paul Tudor Jones, who compared Bitcoin to “investing in Google early.” Even if they are burned on a big bet, it’s money they won’t lose.