Legendary hedge fund manager Paul Jones: Inflation is the top threat, Bitcoin is better than gold for hedging inflation

Legendary investor Paul Jones recently stated in an interview that inflation will be the biggest threat to the future financial markets and society as a whole. While he previously favored gold over Bitcoin, he now believes that cryptocurrencies are superior to gold as an inflation hedge.

Inflation More Severe Than Imagined

Paul Tudor Jones, a prominent Wall Street hedge fund manager and founder of Tudor Investment Corporation, shared his views on future market trends in an interview with CNBC.

Investors' Top Challenge: Inflation

Jones believes that the primary challenge for retail investors is inflation, emphasizing that inflation is not transitory and could be the biggest single threat to the financial markets and society as a whole.

Factors such as the economic stimulus measures by the Federal Reserve and the U.S. government, record highs in the Consumer Price Index (CPI), among other data, indicate the persistence of inflation. He stated:

There is a law of supply and demand, with $3.5 trillion of excess money in the market, which could flow into stocks, real estate, cryptocurrencies, or consumption at any moment. The substantial amount of "idle funds" waiting to be spent at some point, coupled with the 5.9% increase in Social Security benefits next year, further fuels the fire, demonstrating that inflation is not transitory.

He also mentioned the presence of over 10 million job vacancies in the U.S., highlighting structural issues in the labor market that cannot be resolved by "zero interest rates" and "quantitative easing" alone.

Avoid Fixed-Income Products

Jones further pointed out that in the current environment of high inflation and low interest rates, one should steer clear of fixed-income products:

Having a 60% stock and 40% bond investment portfolio simply won't work. Fixed-income products are not what you want to hold, as the government's actions indicate that their efforts to combat inflation will be slow and delayed.

He emphasized that the Federal Reserve is a creator of inflation, not a fighter against it.

Bitcoin Surpasses Gold

The host mentioned Jones' initial interest in Bitcoin, citing a letter he wrote to investors last May comparing Bitcoin to gold and noting the significantly undervalued nature of Bitcoin at the time. Jones now believes that Bitcoin is a better hedge asset compared to gold. He stated:

I personally hold a single-digit percentage of my assets in cryptocurrencies. The world is moving towards digitalization, and cryptocurrencies are clearly carving out a space for themselves, outperforming gold at present. I think it's a fantastic hedge asset, and in the current scenario, I'd rather hold cryptocurrencies than gold.

When asked about the issue of high long-term holding costs for Bitcoin futures ETFs, Jones expressed:

I prefer to directly hold physical Bitcoin and learn how to truly possess it. I'm not an ETF expert, but I don't see major issues with ETFs; the SEC's consideration is likely aimed at providing a more convenient investment option.

He seems confident in U.S. regulation, stating that the U.S. is the most dominant economic power due to its entrepreneurial spirit and creativity, contrasting China's economic course as a small boat sailing towards Antarctica.

Previously, Jones mentioned that in his ideal investment portfolio, both gold and Bitcoin comprised 5%, with the allocation to Bitcoin potentially increasing but still remaining below 10%.