Billionaire Hedge-Fund Manager Paul Tudor Jones Is Buying Bitcoin Hand Over Fist (but Not for the Reason You Think)

The price of Bitcoin (CRYPTO: BTC) is now up more than 110% for the year and on the cusp of breaking through the $100,000 mark, so it's perhaps no surprise that top hedge fund investors are looking for ways to add this soaring cryptocurrency to their portfolios. Among them is billionaire hedge-fund manager Paul Tudor Jones.

Based on recent 13F filings with the Securities and Exchange Commission, Jones increased his position in Bitcoin by more than 400% between the second and third quarters of this year. His total Bitcoin holdings are now worth nearly $230 million at current market prices.

If Jones is buying Bitcoin hand over fist, should you be, too?

How to buy Bitcoin if you're a billionaire

First of all, saying that Jones is buying Bitcoin requires a bit of clarification. He's not actually going into the spot cryptocurrency market and buying Bitcoin. Instead, he's buying the iShares Bitcoin Trust (NASDAQ: IBIT), the largest and most popular of the new spot Bitcoin exchange-traded funds (ETFs), with more than $40 billion in assets under management.

Via the ETF, he's able to get exposure to the price movement of Bitcoin without actually worrying about holding Bitcoin himself. That's because the iShares Bitcoin Trust provides nearly 1:1 tracking of the daily price movement of Bitcoin, all in the format of a low-expense investment product that's widely available to investors.

According to 13F filings from the second quarter of the year, Paul Tudor Jones held 869,565 shares of the iShares Bitcoin Trust. New 13F filings from the third quarter of the year, though, show that he increased his position by more than 400%.

As of Sept. 30, he held 4.4 million shares of the iShares Bitcoin Trust, which were valued at more than $159 million at the time of the filing. At current market prices, they would be worth about $230 million.

Why Paul Tudor Jones is buying Bitcoin

Given all the pro-crypto optimism in the market right now, you might think that Jones has been rapidly accumulating his position in Bitcoin due to confidence in the new Trump administration. Because hedge funds often use market-timing strategies, it would be logical to conclude that he was ramping up his exposure to Bitcoin ahead of an expected Trump victory in November.

Image source: Getty Images.

But that's not the reason he was buying Bitcoin. Jones has been very outspoken about why he's so bullish on the cryptocurrency. Quite simply, he views it as one of the very best hedges against inflation.

As Jones sees it, inflation isn't going away anytime soon, and he's adjusting accordingly. As he recently told CNBC in an interview, "All roads lead to inflation."

In the past, he has alluded to Bitcoin being a form of so-called digital gold. In part, that's due to the nature of Bitcoin's circulating supply.

The total lifetime supply of Bitcoin is capped at 21 million coins, and the creation of new Bitcoin is carefully controlled by a computer algorithm. There's no central authority -- such as a central bank or corporation -- that can ever change this algorithm. As Jones once pointed out, "It's the only thing humans can't adjust the supply in, so I'm sticking with it."

Be careful with 13F filings

Recent 13F filings indicate that Jones is very bullish on Bitcoin. In fact, at the time of the most recent filing, it was the third-largest non-options position in his entire portfolio, trailing only larger stakes in the SPDR S&P 500 ETF Trust and Nvidia.

But keep this in mind: By their very nature, 13F filings are backwards-looking. Even the most recent 13F filing from Nov. 14 only shows us what Jones was holding as of Sept. 30. A lot has happened between now and then, including the election of Donald Trump as the next U.S. president.

What's next for Bitcoin?

Given Jones' concerns about inflation, it will be interesting to see what happens next with his Bitcoin holdings. If he decides that Trump's economic policies will help to rein in inflation, he might decide to pare his Bitcoin holdings. Conversely, if he's concerned that new Trump tariffs might lead to even worse inflation, he might decide to buy even more Bitcoin.

This all marks a moment when it could be time to expand the way you think about Bitcoin. Yes, it has incredible future growth potential, but it can also act as a potential hedge against inflation. And that's precisely what makes it so valuable in the eyes of many investors.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.