SkyBridge Capital Says That “Bitcoin Is Better At Being Gold Than Gold”

Bitcoin is described as a digital form of gold to explain its scarcity and potential as a store of value. But what does “digital gold” really mean?

This week, Anthony Scaramucci’s SkyBridge Capital announced the launch of its investment thesis, presentation and full website for its new Bitcoin Fund LP. Unlike other investment firms, it went a step further in explaining why it is actively choosing bitcoin over gold.

SkyBridge Capital’s main fund, with $9.3 billion in assets under management (AUM), has invested a now-roughly $300 million position in bitcoin. In December 2020, it announced that it was raising a new, separate bitcoin-only fund and had already transferred about $25 million worth of bitcoin into it. 

This week, it opened the fund to accredited investors with a minimum investment of at least $50,000. This bitcoin LP won’t trade, but you only pay a 0.75 percent annual fee and no premium. The portfolio is priced by Bloomberg’s fixed rate (XBT). This is in contrast to GBTC (a grantor trust) which trades OTC, has a 2 percent annual fee and includes a premium to bitcoin’s price. 

SkyBridge’s website is a vast library of information. It has its offering memorandum, investment presentation and investment thesis. It also includes: 

Toward the bottom of the website, it also takes a dig at GBTC’s premium and offers to walk through a “GBTC swap” to its fund. It understands the hurdles that many traditional investors face in investing into bitcoin and lean into them.

More enjoyable than reading the funny digs at GBTC, though, is reading the digs on gold. Because, as other large institutional investors have recently bought bitcoin, they have largely done so while also still holding gold.

An example is Ruffer’s ($27 billion AUM) recent $775 million bitcoin purchase through its multi-strategy fund, which was about 2.5 percent of the portfolio. This was a huge step, but still very small compared to its gold and inflation-linked bond holdings.

Another example was when the head of global equities at Jefferies recently cut the gold exposure in the long-only pension funds in favor of bitcoin. But even after this, bitcoin remains a 5 percent allocation vs. 65 percent gold bullion and gold mining holdings. 

With a bitcoin-only LP, there’s no getting around the question of “why bitcoin vs. gold?” SkyBridge needs to tackle it head on, and it does. Its investment thesis is 10 pages (not including legal disclaimers) and about one-third of them focus on why gold is inferior to bitcoin and how bitcoin will be gold 2.0.

It quickly establishes that there is a need for a deflationary asset — increasing debt, increasing money supply and low interest rates.

It then quickly asks: “Is gold to the rescue?”

No.

The major points it provide for pro bitcoin vs. gold are:

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A consortium including CoinShares and Blockchain has launched a gold-backed token on a Bitcoin sidechain.

  • Fixed vs. limited supply (the gold supply increases by about 1.25 percent supply per year)
  • The tech industry will be primary driver of marginal wealth creation — a digital asset fits this 
  • More wealth is being transferred to millenials — transferability and storage of bitcoin fits this demographic

Its thesis also includes a summary graphic:

https://lh4.googleusercontent.com/qk8OZ1IUp4hJuUmReH72C2j2LdHqSJWH93_YQhghKCP_1NEpsfI8QG35be0SeCztViB_qYHIxl1P0Dd1AQ1PbV06F3z34A0YmFR5ppKQHnaoJYMG6JCu-4KvO1MX3NaDm4aki5Bc

The SkyBridge presentation expands on gold 2.0 even further, beyond the investment white paper, explaining why bitcoin is superior and also using gold as an example of potential growth.

In its opening page, it states that “Bitcoin is better at being gold than gold” and cites gold’s existing market capitalization as an example of where bitcoin’s price could grow.

https://lh4.googleusercontent.com/3h47DzyRo2yMhy1Fc7rr9FOHQG6X90RyhvpAdIy5ng1_OGW1X-oaG7jt4gUOoTzruUFqD3U9R2PgBautR--m1AaEp3NILmz0a9207oZwEw1SB2X7XIKyXF9vWbH4PiGwjp9Mrezt

The presentation and thesis continue by covering Halvings, growing adoption and bitcoin as a portfolio diversifier. But the most interesting aspect remains the fact that an institutional investor directly addresses the question of “why bitcoin over gold?”.

All in all, the launch of the SkyBridge Bitcoin LP is another strong step in Bitcoin’s adoption by investors. It notes the problematic premium with GBTC for investors and addresses head on why an institutional investor would choose bitcoin over gold.

This is a guest post by Ellie Frost. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.