Jefferies asserts that both Bitcoin and gold should be viewed as a long-term insurance policy rather than a short-term trade. The firm believes that the potential for monetary policy to reduce the value of currency, along with the potential for inflation, make these investments critical hedges. Despite investors’ expectations that a U.S. recession will not occur, macro signals still suggest that there will be a downturn in the U.S. This is due to the massive expansion of money supply in 2020.
Jefferies believes that central banks, especially the Federal Reserve, will not be able to exit from unconventional monetary policy in a benign way, ultimately leading to the collapse of the U.S. dollar paper standard. This would benefit both gold bullion owners and Bitcoin owners.
The firm suggests that U.S. dollar-based long-term global investors, such as pension funds, should allocate 10% to Bitcoin. Jefferies has done this in the past couple of years, viewing Bitcoin as an alternative store of value to gold. This year, the firm introduced a global long-only equity portfolio that includes a 3% weighing in the Grayscale Bitcoin Trust (GBTC).
