Bram Berkowitz, The Motley Fool
5 min read
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Philippe Laffont worked at Julian Robertson's Tiger Management and has made many successful early tech investments.
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While not backed by physical assets, Bitcoin runs on the blockchain, which is considered a significant technological disruption.
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Laffont sees progress in Bitcoin for several reasons including the fact that it is now less volatile than it once was.
Philippe Laffont is part of an elite group of investors called Tiger Cubs. Tiger Cubs worked for Julian Robertson's hedge fund, Tiger Management, in the 1990s and then went on to found their own hedge funds. Laffont launched Coatue Management in the 1990s and heavily invests in the tech and artificial intelligence (AI) sectors.
The multibillionaire was an early investor in Snap, Spotify, and TikTok parent company ByteDance. Needless to say, Laffont and his team are extremely skilled at evaluating companies in the tech industry. Recently, Laffont gave investors in Bitcoin (CRYPTO: BTC), the world's largest cryptocurrency, reason to cheer. Here's why.
Bitcoin is only about 16 years old, so investors are still learning a lot about the digital asset and the world's largest cryptocurrency. For many years, Bitcoin and the broader crypto market had been viewed as the Wild West and many investors ignored Bitcoin due to the token's big price swings and also because it doesn't generate earnings, free cash flow, or return capital to shareholders.
However, Laffont said at a recent crypto conference that he thinks Bitcoin's volatility has begun to decrease. "It's intriguing to me that maybe ... the cost of getting into Bitcoin is shrinking," Laffont said at Coinbase Global's State of Crypto Summit, according to CNBC. "If the beta shrinks, that would be very interesting."
Beta looks at the relative volatility of an asset compared to the broader market. So if the beta of the broader market is 1 and an asset has a 1.5 beta, one can expect that asset to outperform the market in good times and underperform the market in bad times. Investors typically are looking to generate the most alpha with the smallest amount of beta possible because that leads to strong returns with less risk and therefore more protection in a downside scenario.
Laffont attributes Bitcoin's declining volatility partly to more institutional investors buying Bitcoin. Interestingly, Bitcoin only fell about 5% between April 2 and April 10, when the market got crushed after President Donald Trump announced sweeping tariffs on the country's largest trading partners. Meanwhile, the Nasdaq Composite fell 6%. Laffont has said he deeply regrets not investing more in Bitcoin. He also acknowledged that he overlooked the simple concept that if a critical mass of people view Bitcoin as valuable, it is only likely to grow in value.
