Jefferies Recommends 10% Bitcoin Allocation as ‘Critical Hedge’

By Kevin • October 7, 2023 4:01 pm • Comments

Jefferies, a prominent global investment firm, has thrown its support behind Bitcoin as a “critical hedge” against potential monetary policies that could devalue fiat currencies and trigger inflation.

In a recent investor note, Jefferies highlighted Bitcoin’s unique attributes, positioning it alongside gold as a reliable defense against inflation.

Christopher Wood, the Global Head of Equity Strategy at Jefferies, expressed concern that major G7 central banks, particularly the Federal Reserve, may encounter challenges when attempting to exit from unconventional monetary policies smoothly.

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Wood emphasized that a failure to do so could lead to a decline in the value of the U.S. dollar, which could, in turn, benefit Bitcoin investors.

FinBold reports:

In highlighting the potential significance of Bitcoin as a hedge against inflation, Jefferies pointed out that investors have primarily dismissed concerns of a U.S. recession, but economic indicators continue to signal an impending downturn.

Moreover, they pointed out that efforts to tighten monetary conditions will experience a more prolonged delay in this economic cycle due to the significant expansion of the money supply since 2020. In light of this, Jefferies encouraged investors to view Bitcoin and gold investments as insurance rather than short-term trades.

Jefferies has also recommended a 10% allocation to Bitcoin for U.S. dollar-based long-term global investors, including pension funds.

The firm has incorporated Bitcoin into its global portfolio over the past couple of years, alongside physical gold, unhedged gold mining stocks, and Asia equities.

Jefferies also emphasized the potential significance of Bitcoin as a hedge against inflation, noting that while investors have largely dismissed concerns about a U.S. recession, economic indicators continue to signal an impending downturn.

Additionally, they pointed out that efforts to tighten monetary conditions may face delays due to the substantial expansion of the money supply since 2020.

As a result, Jefferies encouraged investors to view Bitcoin and gold investments as insurance rather than short-term trades.

In a significant move, Jefferies recommended that U.S. dollar-based long-term global investors, including pension funds, allocate 10% of their portfolios to Bitcoin.

The firm has been incorporating Bitcoin into its global portfolio over the past few years, alongside physical gold, unhedged gold mining stocks, and Asia equities.

KitCo reports:

“When plugging Bitcoin into most value-at-risk models, the facts of the flat performance for about the past five years and more risk may weigh on reallocation decisions from equities, made easier via spot ETFs,” McGlone said.

In a separate note, McGlone warned that “Bitcoin has gained with most risk assets in 2023, but it may be a short-covering rally. Bloomberg Economics has remained steadfast with its outlook for a U.S. recession by year-end. About $30,000 remains pivotal Bitcoin resistance, with risks tilted towards $10,000,” he said.

One market commentator who remains steadfast in his promotion of Bitcoin, gold, and silver as hedges against excessive money printing and hyperinflation is Rich Dad Poor Dad author Robert Kiyosaki, who recently warned his followers that they risk losing their purchasing power in the near future if they continue to hold fiat currencies.

Jefferies’ recognition of Bitcoin as a “critical hedge” marks a notable milestone for the cryptocurrency, highlighting its increasing acceptance as a legitimate asset class and a store of value, especially in times of economic uncertainty and evolving monetary policies.

The focus is now shifting towards various financial products that are likely to facilitate the entry of traditional financial entities into the cryptocurrency market.

One of the key developments being awaited is the Securities and Exchange Commission’s (SEC) decision regarding the approval of a spot Bitcoin Exchange Traded Fund (ETF).

Overall, Bitcoin continues to gain traction as an essential consideration for well-diversified portfolios, with institutions like Jefferies recognizing its potential to provide a hedge against currency devaluation and inflation in an ever-changing financial landscape.

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