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Bitcoin hits $42,000 as world's largest hedge fund to invest in crypto

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Ray Dalio, founder, co-chief investment officer and co-chairman of Bridgewater Associates, announced in May 2021 that he has a personal investment in bitcoin, but now the world's largest hedge fund is planning to put its own money into derivatives backed by bitcoin. Photo: Brian Snyder/ Reuters

Bitcoin (BTC-USD) broke through the $42,000 mark on the news that Ray Dalio's Bridgewater Associates hedge fund is set to invest in the world's preeminent cryptocurrency.

On Tuesday the price of bitcoin rose 3.3% to $42,571.

Ethereum (ETH-USD) jumped 16.5% in a week to $3,020 after its co-founder Vitalik Buterin appeared on the front cover of Time magazine.

The news that Bridgewater Associates, the world's largest hedge fund with $150bn in assets, is to invest in bitcoin is the brightest signal yet that institutional finance sees a long-term upward trajectory for the cryptocurrency.

The hedge fund is one of several financial institutions that are adding bitcoin to their investment portfolios.

Dalio's firm is following a July 2021 move by London-based hedge fund Marshall Wace, which was reported to be starting up its own crypto fund.

Bridgewater Associates is planning to invest in an external vehicle that is linked to the price of bitcoin, according to CoinDesk.

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Dalio announced in May 2021 that he has a personal investment in bitcoin, but this is the first signal that the world's largest hedge fund is planning to put its own money into derivatives backed by bitcoin.

The company told CoinDesk in February: “While we won’t comment on our positions, we can say Bridgewater continues to actively research crypto but is not currently planning on investing in crypto."

Recently, there have been signals of a shift in attitude towards bitcoin from both institutions and regulators.

The US Securities Exchange Commission (SEC) has put an extension on the time when it will decide on whether to sanction two bitcoin spot exchange-traded funds (ETFs).

The SEC has previously had a hostile attitude towards bitcoin ETFs.

The commission released a statement on both the One River and WisdomTree ETFs saying: “The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and any comments received."

Watch: Steve Hanke on Milton Friedman's 1999 cryptocurrency predictions

On Monday, Goldman Sachs (GS) traded a non-deliverable bitcoin option, which is a derivative tied to the price of bitcoin but pays out in cash instead of the underlying cryptocurrency.

This is the first time that a Wall Street bank has completed an over-the-counter (OTC) bitcoin-related trade.

Galaxy Holdings Digital, the cryptocurrency firm that facilitated the trade, said: "This marks the first OTC crypto transaction by a major bank in the US as Goldman Sachs continues expanding its cryptocurrency offerings, demonstrating the continued maturation and adoption of digital assets by banking institutions."

Read more: 'Crypto lobby groups are dictating terms in Washington'

The move follows news from earlier in March that the Wall Street heavyweight was offering crypto-curious clients access to Gallaxy Holdings' Institutional Ethereum Fund.

Regulatory documents filed with the SEC at the beginning of March said: “Goldman Sachs & Co. LLC will receive an introduction fee” for clients that it introduces to the Galaxy Institutional Ethereum Fund.

Watch: Steve Hanke on crypto-lobbyists

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