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The chief executive of Man Group, the world’s largest listed hedge fund manager, says cryptocurrencies have “no inherent worth” but are creating trading opportunities for his company because of their wild price swings.
The comments made by Luke Ellis in an interview with the Financial Times highlight an irony of today’s trade in cryptocurrencies — much of the market action involves participants who doubt their ultimate utility.
“If you look at cryptocurrencies as a whole, it is a pure trading instrument. There is no inherent worth in it whatsoever. It is a tulip bulb,” Ellis said, referring to the flower that became the focus of a 17th century Dutch financial mania.
London-based Man Group, which manages $127bn for clients, is known for using quantitative models that seek to profit from pricing anomalies and trends in the markets. Ellis said cryptocurrencies were one of the “probably 800 markets we trade today on top of 15,000 stocks and thousands of credits”.
“We like to be long and short depending on what the models say is likely to happen to the market and we will trade it long and short just as happily and in as big a size as market liquidity lets you trade,” he said. “We trade S&P futures all the way to sushi rice futures.”
But Ellis said that just because Man Group deals in cryptocurrencies does not mean they were “an asset management product”, in which funds “deliver value” by owning an asset for investors. He said cryptocurrencies were “things to trade because they go up and down a bunch”.
Like many in the financial world, Ellis is a believer in the potential of the blockchain technology underpinning cryptocurrencies to increase the efficiency of payments systems. But he takes issue with the idea that tokens themselves will forever be “a limited-supply instrument”.
“You can have an infinite number of different cryptocurrencies,” he said. “Anyone can start another one any day.”
For all his doubts about the value of cryptocurrencies, Ellis is empathetic when it comes to the motivation of investors who have turned to such assets — rightly or wrongly — as a potential hedge against inflation.
“The number one thing that clients are worried about is inflation,” he said, adding that he expected such anxieties to persist.
“I think we stay in a world of very low rates until central banks lose control and when they lose control, it’s not going to be fun,” he said. “For some of the strategies we trade, we might do very well. But that doesn’t mean it’s a good thing.”
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