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 (BTC -3.49%), the world's largest cryptocurrency, reason to cheer. Here's why.
Bitcoin is becoming less volatile
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.
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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.
Bitcoin can now be in your portfolio
With Bitcoin becoming less volatile, Laffont believes Bitcoin can become "more central" to the average portfolio. That could be a tailwind for Bitcoin because it only has a $2 trillion market cap, a fraction of the world's $500 trillion of net worth. One reason more investors may buy Bitcoin is because it's increasingly being viewed as a hedge against inflation due to its supply cap of 21 million tokens.
Some investors also view it as a form of digital gold. The market has driven up the price of gold in recent years due to geopolitical uncertainty and concerns about the U.S. government's finances, which includes a more than $1.8 trillion fiscal deficit in 2024, and total debt that's now north of $36 trillion. Laffont isn't the only one who thinks Bitcoin can be bought by more general investors. BlackRock, the largest asset manager in the world, put out a report last year, saying it thinks investors can allocate as much as 2% of their portfolios to Bitcoin.
I would agree that investors managing a general retirement portfolio can now allocate a small portion of capital to Bitcoin. With the broader benchmark S&P 500 now more heavily concentrated in a handful of dominant companies, it's harder for investors to diversify, making it more important they get some exposure to unique assets like gold, Bitcoin, and potentially oil and gas. If Bitcoin becomes even a small part of the traditional portfolio, then the price of the world's most valuable token is likely going to be less volatile and move higher over time.
