During a recent interview with CNBC, Paul Tudor, a well-known hedge fund manager, expressed concerns about bitcoin’s situation in the United States, warning that it is in danger and that there are “real problems” surrounding the area.
Bitcoin as A Hedge Against Inflation
In the first part of the interview, Tudor states that he views bitcoin as an appealing hedge against inflation during a period of significant inflation in the U.S. In fact, Tudor had considered allocating 5% of his assets to bitcoin in 2020.
He stated in the interview:
“I’m sticking with it. I’m always going to stick with it. I’ve never sat on a horse that long, just so you know.”
According to Tudor, one of the main factors that drew investor attention to bitcoin was the sudden onset of inflation and its perpetual cycle.
He mentions he sees bitcoin as a hedge against inflation, highlighting its fixed supply and the inability of humans to adjust that supply. He acknowledged the recent volatility of bitcoin’s price, noting that he had ridden the market up to its peak and then back down.
Debates of SEC, CFTC and the Senate over Digital Assets
Tudor argues that the regulatory framework in the country is inherently adversarial towards bitcoin.
The U.S. Securities and Exchange Commission (SEC) has taken strict actions against various digital asset exchanges due to their involvement in scams, internal issues, or their disregards towards the regulatory laws. Furthermore, the SEC has declined to categorize altcoins as registered securities, unlike stocks in the U.S.
While the SEC chairman Gary Gensler has consistently regarded bitcoin as a commodity rather than a security, Tudor suggests that these factors contribute to the significant challenges faced by bitcoin in the U.S.
With the SEC classifying bitcoin as a commodity, the responsibility for bitcoin matters has shifted to the Commodity Futures Trading Commission (CFTC). The debate regarding whether bitcoin should be classified as a commodity or security remains ongoing.
In a recent hearing session in March 2023, Rostin Behnam, the chair of the Commodity Futures Trading Commission, stated that CFTC classifies ether and stablecoins as commodities alongside bitcoin.
Behnam also added:
“[Bitcoin is] unlike any commodity we have dealt with.”
This signifies the confusion among governing regulatory bodies over different asset classes of digital currencies and highlights the differences they have over digital currencies, which only adds to the chaos.
At the same time, lawmakers in the United States have been actively introducing bills in the Senate with the aim of simplifying bitcoin regulations nationwide. Senator Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York have committed to supporting a bill specifically focused on bitcoin.
The recent collapse of FTX has put the Securities and Exchange Commission (SEC) on high alert. Incidents like these, coupled with the SEC’s lawsuits against Binance and Coinbase for facilitating trading of unregistered securities, have intensified the scrutiny surrounding the bitcoin industry.
Tudor believes price of bitcoin will continue to experience fluctuations until U.S. authorities cease their pursuit of digital asset exchanges and inflation rates stabilize. He insists that establishing consistent regulatory laws throughout the country is crucial for instilling confidence among current investors and making bitcoin a safer investment option.
“Bitcoin has a real problem because in the United States, you have an entire regulatory apparatus against it.”
Paul Tudor remains cautiously optimistic about bitcoin’s long-term potential and continues to maintain a small allocation to it in his portfolio. However, he highlighted the regulatory challenges and the evolving inflationary landscape as factors to consider.