Fund giant slashes Bitcoin stake after Elon Musk tweets trigger a frenzy: Ruffer cashes in on price surge with huge sale – so is bubble set to burst?

By May 1, 2021Bitcoin Business
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Fund manager Ruffer has sold the majority of its holding in Bitcoin after Twitter posts by billionaire entrepreneur Elon Musk sent the price of the cryptocurrency soaring, The Mail on Sunday can reveal.

Ruffer, a conservative asset management firm, surprised the City in November when it put 2.5 per cent of its customers' money – worth $600million (£433million) at the time – into Bitcoin.

Bitcoin's price has since rocketed from $15,000 to $56,200, having hit a record high of $63,000 last month. Ruffer cashed in some profits earlier this year after the value of its investment more than doubled.

Influencer: Tesla founder Elon Musk took a $1.5billion punt on Bitcoin
Influencer: Tesla founder Elon Musk took a $1.5billion punt on Bitcoin

The sale left Ruffer with about $700million invested, or around 3 per cent of its total assets.

A source close to the £22.2billion asset manager said it had reduced its investment to less than 0.5 per cent of its total, representing no more than £110million.

It is understood that Ruffer started to sell out of Bitcoin after Tesla – the electric car company founded by Musk – announced a $1.5billion purchase of Bitcoin in February and said it would start accepting the cryptocurrency as a payment method.

The source described this as a 'sign of a bubble'.

In January, Musk – who has more than 52million followers on Twitter – changed his Twitter profile to include the word Bitcoin, fuelling the value of the cryptocurrency by nearly a fifth on the same day. The South African entrepreneur tweeted at the end of April that he had not sold any of his Bitcoin, although he said Tesla had sold 10 per cent of its investment to prove it is easy to sell and is 'an alternative to holding cash'.

Hector McNeil, founder of robot fund company HANetf, said: 'Elon tweets a lot of things and he's also right about a lot of things.

'What I've seen over the past six months is how mainstream Bitcoin is becoming. For every investor that pulls back, ten more are getting involved.'

A senior fund manager at one of the world's largest fund groups said: 'We're doing some trading in it, rather than investing in it, just to understand it. It's kind of a wait and see, as an investment asset class.'

One analyst said the surging price of Dogecoin, another cryptocurrency, was a sign of a bubble in cryptocurrency, adding that it could burst once investors' excess cash starts dwindling and leads them to sell out.

Dogecoin is trading at 36 cents. It was below 10 cents earlier this year. Ruffer has explained that the rationale for buying Bitcoin was increasing interest from other fund giants such as Fidelity and BlackRock and large companies including Mastercard and PayPal.

The analyst said Bitcoin is viewed as an alternative to gold, which is seen as a store of value when inflation takes off.

The investment company is thought to have insured its Bitcoin holding through Coinbase, the cryptocurrency exchange that listed on the US Nasdaq exchange last month at a value of $75.9billion.

Earlier this year, Ruffer said: 'Due to zero interest rates the investment world is desperate for new safe havens and uncorrelated assets.

'We think we are relatively early to this, at the foothills of a long trend of institutional adoption and financialisation of Bitcoin.' Alexander Chartres, a fund manager at Ruffer, told Citywire investment website: 'The speed of the build-out of the institutional architecture around cryptocurrency has been blistering, even in the time that we have had exposure to Bitcoin.'

Chartres said a key part of investing in Bitcoin was that investors will 'increasingly desire life rafts in a sea of money printing' as they look for returns on their cash. He added: 'More and more managers will see Bitcoin and digital hard assets as part of that solution.'

Reports last week that the German government could allow wealth managers to invest in cryptocurrencies was another sign that Bitcoin is becoming a more mainstream investment.

Bitcoin reached a record high last month on the same day that Coinbase listed. Analysts at JP Morgan said that Bitcoin's use as an alternative to gold and its limited supply could see it surge above $146,000 in time.

The analysts added: 'Bitcoin's competition with gold has already started in our mind.'

Ruffer declined to comment on its decision to reduce its Bitcoin holding.

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