‘Long Bitcoin” Is Still the Second-Most Crowded Trade, Despite 50% Drawdown: BoA Survey

‘Long Bitcoin” Is Still the Second-Most Crowded Trade, Despite 50% Drawdown: BoA Survey

80% of fund managers say the market is in a bubble with inflation and bond market taper tantrums being the top tail risk.

About 80% of fund managers surveyed by Bank of America say the market is in a bubble, up from 75% in May.

The survey of 207 investors with $645 billion in assets further revealed that “long Bitcoin” is the second-most crowded trade after commodities.

This has been despite the fact that Bitcoin had a 50% drawdown last month from its all-time high of nearly $65,000 in mid-April. Following the drop to $30,000 and on some exchanges as low as $28,000 during the sell-off, BTC is back above $40,000.

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Meanwhile, an increasing number of institutional investors, asset managers, and banks are adopting cryptocurrencies and offering services.

Just this week, veteran hedge fund manager Paul Tudor Jones said he likes “Bitcoin as a portfolio diversifier” and shared his plan to invest 5% of his portfolio in Bitcoin, the same percentage as gold, cash, and commodities.

Meanwhile, besides long Bitcoin, “long tech stock,” “long ESG,” “short US treasuries,” and “long Euro” are other crowded trades this month.

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The survey conducted between June 4 to 10 further revealed that while allocation to bonds is at a three-year low, net -69%, stocks are back up at 2021 highs of 61%.

Allocation to U.S. equities remained at 6% overweight while allocation to Eurozone equities increased to a net 41% overweight, the highest since Jan. 2018. Meanwhile, exposure to UK stocks increased to the highest level since March 2014 and is 4% overweight.

In the next four years, managers see a mix of value and tech stocks as best-performing assets.

According to 57% of investors, any equity correction to occur in the next six months is likely to be less than 10%.

When it comes to inflation, 72% of investors say it is transitory, and 63% expect the Federal Reserve to signal tapering in August-September. Inflation and bond market taper tantrum are the top tail risk.

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Author: AnTy

Bitcoin’s the Most Crowded Trade After Long Tech and Short US Dollar: BoA Survey

Bitcoin’s over 170% YTD rally has everyone rushing in, which makes it one of the most crowded trades of December 2020, according to Bank of America (BOA).

The investment banking giant revealed its latest survey findings, according to which about 15% of fund managers with $534 billion under management said Bitcoin is the third-most crowded trade.

The first spot was taken by long technology shares and the second – shorting the US dollar. The survey was taken between Dec. 4 and Dec. 10. Longing corporate bonds and gold are also among the most crowded trades.

“At a market cap of $360B in a world of $17T negative-yielding debt, by definition, BTC is not the most crowded trade,” noted analyst Qiao Wang.

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The largest cryptocurrency surged to its all-time high at the beginning of this month after rallying more than 80% in October and November. Following the strong rally, Bitcoin has taken to ranging this month only to rally to over $20,800 today.

The rally was particularly started by Square making a $50 million investment in Bitcoin, after MicroStrategy’s big bet on the digital asset, which has now gone well above $1 billion. PayPal announcing support for cryptocurrencies also helped push the price of them higher.

All of this has brought the attention of the mainstream firms to the crypto market. From legendary investors like Paul Tudor Jones, Stanely Druckenmiller, and Bill Miller, to Guggenheim Partners, MassMutual, and many others, everyone is onto Bitcoin this year.

These investments are actually “laying out the groundwork for how you add Bitcoin to your balance sheet, how you should think about Bitcoin as a substitute for cash,” said New York-based CoinFund’s managing partner, Seth Ginnis, in a webinar this week.

This is evident from the fact that the market is being driven by North American institutional investors, as per Philip Gradwell, the chief economist at Chainalysis.

And still, as JPMorgan said, Bitcoin’s institutional adoption has just begun.

JPMorgan’s recent report said that the $100 million Bitcoin investment by insurance behemoth means the leading cryptocurrency could see $600 billion in additional demand.

Ginns also reported seeing a lot of interest from hedge funds and getting calls from pension plans, endowments, family offices, and foundations, suggesting the continued trend of broader institutional adoption next year.

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Author: AnTy