Even though the cryptocurrency market has proven time-tested, some billionaire investors don't see it as a worthy place for retail investors. Billionaire investor John Paulson, who rightly predicted the subprime crisis ten years ago, turned to cryptocurrency investors.
His concerns
Now, 14 years after the 2008 financial crisis, Paulson is expressing concern about excessive speculation in the crypto space. Speaking on an episode of "Bloomberg Wealth with David Rubenstein," Paulson, 65, said that cryptocurrencies are a bubble that "will eventually prove worthless."
“I would not recommend anyone to invest in cryptocurrencies, ”he added. Well, it's not the first time cryptocurrencies have received criticism from billionaire investors. Even giants like Warren Buffett have deeply criticized digital assets.
However, over the past decade, crypto assets have outperformed traditional asset classes like gold by a huge margin. Also, Paulson's record from his "biggest trade" in 2008 wasn't very appealing.
Last year, Paulson had to transform his hedge fund into a family office with assets that fell to $ 9 billion in 2019, from a staggering $ 38 billion in 2011.
Prefer gold to cryptocurrencies
Despite the fact that cryptocurrencies have far surpassed gold, Paulson prefers to stay on the old school and prefer gold to cryptocurrencies. Maybe he could make very good friends with Peter Schiff.
Seriously, Paulson said that as inflation rises, they tend to move away from fixed assets and cash, and the right place to be is gold. Furthermore, by pointing to a 25% increase in the Fed's money supply, he expects inflation to exceed current expectations. And so, Gold! When asked if he believes in cryptocurrencies, Paulson said:
"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 that there is more demand than limited supply, the price would go up. But as demand decreases, the price will drop. There is no intrinsic value to any of the cryptocurrencies except there is a limited amount ”.
He further added that cryptocurrencies will ultimately prove useless. And once the liquidity in the market dries up, they are approaching zero, according to Paulson. When asked if he is selling cryptocurrencies at this stage, Paulson denied saying:
“There is an unlimited downside to cryptocurrencies. So while I may be right in the long run, in the short term I would be blown away. In the case of Bitcoin, it went from $ 5.000 to $ 45.000. It is simply too volatile to be short ”.
