Christopher Wood, Global Head of Equity Strategy at Jefferies, has made a further five percent allocation to Bitcoin. This doubles the share of Bitcoin at the expense of gold, whose weighting was reduced by the same amount. Is "digital gold" gaining significance as an inflation hedge?
In a weekly investor letter titled "Greed and Fear," Wood announced the reallocation of the billion-dollar investment bank. He hadn't given up on gold yet, but it seemed risky for older goldbugs to ignore reality. Bitcoin, he said, is a clear contender as a store of value. Ether (ETH), on the other hand, isn't something he would include in the pension fund portfolio because it doesn't fulfil that function as an inflation hedge.
Institutional Adoption
According to Wood, the arrival of the first exchange-traded bitcoin fund (ETF) in America and the growing mainstream adoption of cryptocurrencies means it's time to make another adjustment to the USD-denominated Jefferies pension fund portfolio. This was established late in the third quarter of 2002 to hedge the risk of the collapse of the U.S. dollar paper standard. Acoording to Wood, gold's performance this year remains extremely disappointing, given that interest rates are negative in America.
"If blockchain technology has the long-term potential to take over conventional finance by eliminating the need for intermediaries, then it also has the potential to trigger the end of the current dollar paper standard in a more benign way than it otherwise would have." - Christopher Wood, Global Head of Equity Strategy at Jefferies
Criticism of the dollar standard
This concept has begun to consume conventional finance, according to Wood. That, he said, is one reason why all banks should focus on the technology instead of waiting and being disrupted by it. The dollar paper standard would eventually come to an end after former U.S. President Richard Nixon removed the dollar's last formal peg to gold 50 years ago.
He said it was becoming increasingly obvious that central banks in developed countries had fallen into a trap of their own making. In the 13 years since Ben Bernanke's first quantitative easing (QE) program at the end of 2008, they have not been able to move away from these unconventional policies. This trap would become apparent to everyone as soon as inflation actually proves to be more than temporary.
