In a note to investors, Jefferies, a global investment banking firm, has stated that both Bitcoin and gold serve as essential hedges against potential monetary policy that could devalue currency and bring back inflation. While investors have seemingly abandoned the idea of a US recession, macro signals still indicate an imminent downturn, and monetary tightening will have a longer-than-usual lag time due to the significant growth in money supply since 2020.
Christopher Wood, Jefferies’ global head of equity strategy, emphasized that central banks, including the Federal Reserve, will struggle to exit from unconventional monetary policies smoothly. This failure could eventually lead to the collapse of the US-dollar paper standard, benefiting both gold bullion owners and Bitcoin holders.
Wood further stressed that investments in both Bitcoin and gold should be seen as a form of insurance rather than short-term trades. This sentiment aligns with Bitcoin’s narrative of serving as an insurance policy against financial system instability, which gained traction following the regional banking crisis in the US earlier this year.
Due to these reasons, Jefferies recommends a 10% allocation to Bitcoin for long-term global investors who hold US dollars, such as pension funds. The firm has added Bitcoin to its global portfolio alongside physical gold, unhedged gold mining stocks, and Asia equities in recent years. Their decision to incorporate Bitcoin was based on the belief that it has become a viable investment for institutions, with suitable custodian arrangements in place, and it represents an alternative store of value to gold.
Jefferies has also introduced a global long-only equity portfolio that includes a 3% weighting in the Grayscale Bitcoin Trust (GBTC) this year. By including Bitcoin in their offerings, Jefferies acknowledges the growing presence and acceptance of cryptocurrencies among institutional investors.
The note from Jefferies highlights the increasing recognition of Bitcoin’s potential as an alternative investment and store of value. It reinforces the notion that digital assets like Bitcoin are gradually being embraced and integrated into traditional investment strategies. As cryptocurrencies continue to gain traction and acceptance, both Bitcoin and gold may play crucial roles in protecting investors’ portfolios against economic uncertainty and potential devaluation of fiat currencies.