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Hedge fund billionaire says cryptocurrencies are a limited supply of nothing

Hedge fund billionaire says cryptocurrencies are a limited supply of nothing

John Paulson, the man who bet against the housing market in the 2010 crash, recently said that there is no intrinsic value to cryptocurrencies, with the exception that there is a limited amount.  

Billionaire John Paulson spoke to Bloomberg Wealth about the US housing market crash, gold, and cryptocurrencies.  

Paulson hasn’t found a trade to compare with his massive short of the housing market just over a decade ago, but he is saying that rising prices and increased speculation is worrying him. 

His current bet is on gold, which he has been buying for years. Of cryptocurrencies, he believes that they are worthless. He told Bloomberg: 

“I wouldn’t recommend anyone invest in cryptocurrencies,” 

Paulson does not elaborate on how cryptocurrencies have outperformed gold over the last decade by the hugest margin. For someone who has backed a losing horse for many years, it must be particularly frustrating. But should his prediction come true, then of course he will have the last laugh. 

Since his big win over a decade ago his fortunes have been somewhat mixed, and he has turned his hedge fund into a family office, after assets under management dropped from $38 billion in 2011, to $9 billion in 2019. 

Today, Paulson mostly manages his own money. He says he prefers to focus on investing, and doesn’t miss the stresses of running a business, or having to raise funds and meet investors. 

Insofar as cryptocurrencies go, Paulson is most definitely not a fan. When asked by Bloomberg if he was a “believer”, Paulson retorted: 

“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.” 

When asked why he didn’t short cryptocurrencies, given his damning criticism of them, Paulson replied: 

“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.” 

Finally, when asked what was the best advice he’d ever received, he said: 

“the most important thing is to concentrate on particular areas that you know better than other people. And that’s what gives you an advantage.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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