Billionaire hedge fund manager John Paulson, who is known for making a fortune betting on the US real estate market, said cryptocurrencies were a bubble that would prove “useless“. Even though he sees the downside of crypto, he will not cut Bitcoin. “While I may be right in the long term, I will be removed in the short term,” he said.
Famous investor John Paulson predicts that crypto will be useless.
John Paulson, president and portfolio manager of American investment firm Paulson & Co., is a hedge fund manager of an American billionaire who became world-famous in 2007 for shortening the US real estate market. He anticipated the mortgage crisis with mortgages and pledged against mortgage-backed securities by investing in credit default swaps.
Paulson shared his views on cryptocurrencies and bitcoin on Bloomberg TV on Monday in an interview with Carlyle Group founder David Rubenstein.
When asked if he believes in cryptocurrencies, Paulson said, “No, I don’t.”
“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.” The billionaire hedge fund manager added:
Cryptocurrencies, no matter where they are traded today, will eventually prove useless. Once surpluses are gone or liquidity dries up, they will hit zero. I do not recommend anyone to invest in cryptocurrencies.
Paulson was also asked “why not make a big shortage of some types of cryptocurrencies” because he believed they would be useless.
He explains, “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.” He continued:
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.