“Bitcoin is a bubble” is something that has been talked about a lot since the last bull run began in 2017. Many prominent figures in the financial industry took this stance when the digital asset collapsed. it was then a record high of $19,000. The bear market that followed seemed to confirm that for the next few years. Then the 2020 bull race began, and many of those sentiments were put on the back burner. But now John Paulson has hit the market with the same thing.
More than a decade ago, billionaire John Paulson made a bet against the housing market. Paulson reportedly made his fortune from cautious bets against the housing market in 2007. The billionaire used credit default swaps to bet against a housing market that seemed to be in the subprime segment. By 2010, Paulson himself had made $4.9 billion from his betting. The total amount Paulson earned for himself and his clients from shorting the market in 2007 was about $20 billion, making it one of the largest fortunes ever made in Wall Street history.
Bitcoin has no intrinsic value
Paulson was on Bloomberg’s Wealth with David Rubenstein to talk about trading and financial markets. Paulson remained as optimistic about gold as he had been for several years, and he thought the momentum was coming. However, the billionaire had nothing good to say about cryptocurrencies. Cryptocurrencies were heavily criticized by Paulson, who said, “I don’t believe in cryptocurrencies.
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Paulson then called cryptocurrencies a “bubble.” Paulson attributed the value of cryptocurrencies to the high demand for them. It could be argued that this is how the economy works. Demand always plays the biggest role in how something is valued. Paulson also explained that Bitcoin has too many drawbacks. He added that the digital asset was too volatile, too short. Consequently, short methods.
“I would characterize cryptocurrencies as a limited supply of anything. None of the cryptocurrencies have intrinsic value.”
While Paulson was critical of other investments such as SPAC, he was the sharpest on bitcoins. Billion said that cryptocurrencies “will end up being worthless.”
Gold vs. BTC
Paulson’s track record after his famous 2007 short film is not noteworthy. Although his assets under management rose after he gained notoriety from that deal, they soon dwindled when investors took their money away. In 2019, Paulson went from managing $38 billion to only about $9 billion in assets under management, at this point mostly managing his own money. So Paulson turned his hedge fund into a family office.
Paulson is optimistic about gold, even though bitcoin has consistently outperformed the asset over the past decade. While gold has consistently delivered negative returns for its investors, bitcoin has delivered more than 200% year-over-year returns.