Chris Wood | Bitcoins | Gold: Jeffries’ Chris Wood raises Bitcoin allocation at cost of gold

Synopsis

In his weekly note to investors titled ‘Greed and Fear’, Wood said he is not giving up on gold yet but said it is risky for ageing gold bugs to ignore the reality that Bitcoin is a competitor to gold as a store of value.

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Mumbai: Christopher Wood, Global Head of Equity Strategy at Jefferies, has added another five percentage point allocation to Bitcoin in addition to the existing five percentage allocation initiated in December 2020. Wood has done this by reducing the weightage in gold by five percentage points.

In his weekly note to investors titled ‘Greed and Fear’, Wood said he is not giving up on gold yet but said it is risky for ageing gold bugs to ignore the reality that Bitcoin is a competitor to gold as a store of value.

Wood said he is not going to put Ethereum in a pension fund portfolio as it is not a store of value asset, but it is likely to continue to outperform bitcoin in the coming months.
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Ethereum is second only to Bitcoin in market capitalization among cryptocurrencies.

“The arrival of the Bitcoin ETF (exchange traded fund) in America, and the growing mainstream acceptance of crypto, means that it is timely to make a further adjustment to the global portfolio for US-dollar denominated pensions funds which was set up at the end of 3Q02 (third quarter of 2002) as a way of hedging the risk of the collapse of the US dollar paper standard,” said Wood in the note. “In this respect, the performance of gold this year remains hugely disappointing given how negative rates are in America,’ said Wood.

He said that this concept of how it has begun to eat conventional finance is why all banks should be focused on the technology to see how to try and profit from it rather than to wait and be disrupted by it.

“If blockchain technology has the long term potential to eat conventional finance, by eliminating the need for intermediaries, it also has the potential to trigger the end of the current dollar paper standard in a more benign manner than might otherwise have been the case,” said Wood.

He said the US dollar paper standard has been living on borrowed time ever since former US president Richard Nixon removed the last formal link of the dollar with gold 50 years ago resulting in a complete lack of underlying discipline. “It is increasingly obvious that central bankers in the developed world are now in a trap of their own making in the sense that they have not been able to escape from unconventional policy in the 13 years since Ben Bernanke first adopted quantitative easing in late 2008,” said Wood.

He said that this trap will become completely obvious to everyone if inflation really proves to be more than transitory.

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Updated: 11/05/2021 — 05:00