John Paulson, the billionaire investor who predicted (and bet against) the subprime mortgage crisis in 2007, has some not so kind words for cryptos mainly, that it is a and I quote “vacuous financial bubble bound to eventually collapse.” When asked if it was a worthy investment he stated:
“I wouldn’t recommend anyone invest in cryptocurrencies,” Paulson told Bloomberg during a recent interview.
The financier, who is retired from the hedge fund business, made close to $4 billion in 2007 when he bet against the subprime mortgage lending market—a decision that reportedly made him “one of the biggest fortunes in Wall Street history.”
Paulson also described the crypto industry’s tokens as devoid of any actual value except that they exist in limited supply.
He went even further on his argument to say that the industry will ultimately prove “worthless” in the long run, he said. When asked whether he was a fan of crypto, he put it this way:
“No, I’m not. And I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing. So to the extent there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.
Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies.”
Paulson then added that the crypto market was too volatile to effectively bet against as he did with the housing market in 2007. Or in other words he has no intentions of putting his money where his mouth is.
“The reason we shorted subprime in size was because it was asymmetrical — shorting a bond at par that has a limited duration that trades at a 1% spread of Treasuries. So you can’t lose more than the spread in the duration. In crypto, there’s unlimited downside. So even though I could be right over the long term, in the short term, I’d be wiped out. In the case of Bitcoin, it went from $5,000 to $45,000. It’s just too volatile to short.”
Now in fairness, Paulson is not the only one to have made this prediction. Lots of other big important business people like Jamie Dimon and Warren Buffett have expressed their feelings towards the “supply of nothing” view of crypto—with similar theories about a coming token-fueled financial meltdown. However these billionaire investors may have big bucks to shake the stock market but their words are doing very little if anything at all on the crypto world.
Like the article? Do you agree with them or do you have your own opinion on crypto? Leave a comment!