According to The Street, Soros Fund Management has begun trading bitcoin and other crypto products. CIO Dawn Fitzpatrick gave the approval for traders to add bitcoin to the available assets, report undisclosed sources.
Soros Fund Management, led by billionaire investor George Soros, is the first major fund to enter the crypto market. As cryptocurrencies become more intertwined in the global economy, it’s only natural that traditional Wall Street entities stake their claim.
Soros has a history of disrupting traditional fiat currencies
Back in Sep. 1992, Soros famously “broke the pound” on what's now known as Black Wednesday. By borrowing against a weak British pound, Soros and other speculative traders forced the currency to back out of the European ERM (Exchange Rate Mechanism), where participating countries agreed to maintain their currencies within upper and lower bounds in relation to other member currencies.
In the months leading up to Black Wednesday, inflation in the U.K. rose. Soros and other investors believed the pound wasn’t worth what it was valued at. So, Soros began building a short position, then publicly campaigned that the pound would fall below the bounds of the ERM. As a result, other traders and speculators began shorting the pound as well.
The day before Black Wednesday, Soros increased his short position further. It was too much for the Bank of England, and it left the European ERM. Soros then covered his short position, used the devalued pound to repay the borrowed money, and netted an estimated $1 billion.
Crypto critics fear Bitcoin and other digital currencies could do the same thing
MicroStrategy CEO Michael Saylor has done something similar by borrowing dollars to buy Bitcoin. Soros and other investors may follow suit once they realize Bitcoin's finite quantity will further build its value as more tokens get claimed through proof-of-work.
Dollars and other currencies can create an infinite number of units, thus decreasing Bitcoin's value. Such scenarios are becoming more common as debt is being accrued by the U.S. and other governments to combat the COVID-19 pandemic's economic effects.
Many critics of cryptocurrencies believe they're a threat to traditional currencies and could devalue them. China, for instance, has banned cryptocurrencies because of this threat.
Soros Management Fund is just the latest major buyer of Bitcoin
Although Soros Management Fund announcing it will trade bitcoin is newsworthy, it isn't the first major name to do so. On Jun. 28, 2021, TP ICAP announced it would create a crypto platform aimed at hedge funds and investment banks that trade cryptocurrencies.