Soros’ Entry into Cryptocurrency Market Reignites Debate Over Institutional Trading
After bashing cryptocurrencies earlier this year, billionaire George Soros is now planning to trade the virtual asset class, according to people familiar with his affairs. By entering the market, the Soros family office could spark renewed interest in crypto assets among institutions traditionally weary of them.
Soros to Trade Crypto
Bloomberg reported on Friday that Soros Fund Management is set to begin trading cryptocurrencies in the near future. Though no trades have been wagered, the company received internal approval to enter the market earlier this year. The fund currently manages $26 billion in assets.
It is not entirely clear how Soros intends to trade cryptocurrencies. He has referred to bitcoin as a “bubble” that cannot be considered actual currency due to extreme volatility and highly speculative nature. He also highlighted the potential role of dictatorships in propping up the digital asset class.
That said, Soros doesn’t have to be bullish on bitcoin to trade the digital asset class. The billionaire investor is widely known as the man who “broke the Bank of England” by successfully shorting the British pound in 1992. He netted $1 billion in profits for predicting that the BOE would be forced to exit the European Exchange Rate Mechanism.
Attracting institutional money is considered one of the next major obstacles for cryptocurrencies – a market that is struggling with regulatory uncertainty and liquidity constraints. The arrival of bitcoin futures in December was the first major sign that institutional cash would begin flowing into the market, although initial uptake has been weak.
With bitcoin futures in the mix, the next domino will likely be a crypto-backed exchange-traded fund (ETF). Crypto’s entry into the $5 trillion ETF market is “the only major project that remains,” according to Morningstar.
A bitcoin ETF is no easy feat, but there are signs that regulators are entertaining the discussion. The U.S. Securities and Exchange Commission (SEC) has launched formal proceedings on whether to change Section 19(b)(2)(B) of the 1934 Securities and Exchange Act. This doing would theoretically enable the likes of CBOE to start listing bitcoin-based ETFs.
With Soros set to trade cryptocurrency, the debate over institutional demand continues to be an important one. Despite his negative view of the market, his fund has a large stake in Overstock.com – the first publicly-traded company to not only accept bitcoin, but launch its own virtual currency through a subsidiary project called tZERO.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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