Why Fund Managers Are All In on Trump’s Crypto Revolution!

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Since Donald Trump secured a second term as President, Bitcoin has shot up as he vows to transform the U.S. into the “crypto capital of the planet.” This digital darling hit a jaw-dropping peak of around $100,000 on November 22, only to dip back down to $91,000 before bouncing back to a solid $96,000.

While a number of Canadian fund managers are optimistic about Bitcoin’s prospects, they’re quick to remind us that the wild, roller-coaster ride this asset is famous for isn’t over yet.

Peter Hofstra, Senior VP and Co-Head of Equities at CI Global Asset Management, claims Bitcoin is his top pick among cryptocurrencies, yet he maintains a cautious stance given the speculative nature of this volatile market.

“With a U.S. administration that appears supportive of crypto, we can expect demand to stay strong or even grow in the near future,” he adds, hinting at promising tides ahead.

Canadian-listed Bitcoin exchange-traded funds (ETFs) paved the way back in 2021, but it wasn’t until this year that U.S.-listed spot Bitcoin ETFs got the green light, pulling in tens of billions of dollars in record time. The rise of Blackrock Inc.’s iShares Bitcoin Trust ETF has been nothing short of remarkable, with assets swelling to around $48 billion since its launch in January, outpacing its iShares Gold Trust counterpart.

The digital currency has found fans in nations grappling with hyperinflation, allowing them to transfer funds seamlessly into alternative assets without the hassle of intermediaries, Hofstra explains. Despite his bullish perspective on Bitcoin, he plans to cap his exposure, trimming his holdings back to 4% each if they soar.

His fund holds the CI Galaxy Bitcoin ETF, providing direct access to Bitcoin, and Galaxy Digital Holdings Ltd., which diversifies across digital assets. Galaxy is making waves not just in asset trading but also in stablecoin issuance, converting tokens into values pegged to fiat currencies like the U.S. dollar. They’re even venturing into the realm of AI computing!

Miners are feeling the pressure to diversify as Bitcoin’s programmed “halving” event occurs every four years, effectively slashing their rewards in half, with the total Bitcoin supply capped at 21 million by 2140.

Galaxy is also pursuing regulatory approval to list on the Nasdaq Stock Market, a potential game-changer according to Hofstra.

Nick Mersch, Portfolio Manager at Purpose Investments, is even more optimistic about Bitcoin’s future, fueled by Trump’s promise to ease crypto regulations and establish a Bitcoin strategic reserve.

“The regulatory landscape has been incredibly tight for cryptocurrencies,” Mersch notes, highlighting the potential for a more favorable environment that could drive prices up.

His fund’s Bitcoin exposure comes from the Purpose Bitcoin ETF, which he plans to keep capped at 5%. He got in after Trump’s victory, having previously taken profits from his investments in Bitcoin miner Core Scientific.

Mersch has also recently invested in Coinbase, a U.S. crypto exchange, anticipating a surge in transaction volumes as regulatory conditions improve.

“I truly believe Bitcoin is poised for growth over the next two to three years, though the volatility is here to stay,” he asserts.

Bitcoin continues to face turbulence from leveraged plays, like MicroStrategy, which borrows heavily to acquire the asset. ETFs linked to MicroStrategy’s performance can amplify these fluctuations.

However, Alex Tapscott, a Portfolio Manager at Ninepoint Partners, foresees a future where Bitcoin becomes steadier as it matures, gaining traction among both investors and governments.

Overseeing the Ninepoint Web3 Innovators Fund, Tapscott emphasizes a strong commitment to blockchain technology, predicting it will revolutionize financial services and more.

Typically holding 10 to 15% in Bitcoin, the Ninepoint fund gains exposure through both the CI Galaxy Bitcoin ETF and the Purpose Bitcoin ETF, which both debuted in 2021.

In a further testament to the growing market demand, RBC iShares has recently filed to launch an iShares Bitcoin ETF in Canada.

“It’s a clear indicator of the tremendous interest in this space,” Tapscott remarks.

His fund also has stakes in Coinbase, which is leveraging its blockchain technology, Base, to boost transaction speeds and cut costs for its users.

Galaxy Digital Holdings and Bitcoin miner Hut 8 Corp. also feature prominently in the Ninepoint fund, which includes digital finance pioneers like Block Inc. and PayPal, racing ahead in the embrace of Bitcoin and digital assets.

Martin Lalonde, President and Portfolio Manager at Rivemont Investments, made his Bitcoin bet after securing regulatory approval in late 2017, when Bitcoin was valued around $18,000.

“We believe we are in a long-term bull market,” Lalonde asserts, drawing parallels between Bitcoin and gold as a hedge against inflation and geopolitical risks, without the logistical headaches that come with physical gold.

Currently, his cryptocurrency fund is heavily weighted, with 80% directly in Bitcoin and 20% in Solana, an emerging altcoin.

Despite this bullish stance, Lalonde acknowledges Bitcoin’s inherent volatility. “People often rush to buy when prices are soaring, but it’s actually wiser to invest when it’s out of favor,” he cautions.