Famous Former Bitcoin Critics Who Conceded In 2020-21
Publicly recanted! Luminaries who came to terms with crypto in 2020-21. Famous Former Bitcoin Critics Who Conceded In 2020
Bitcoin may never be a widely used medium of exchange, but it has become a useful store of value, former critics concede in 2020.
Humans, being only human, tend to hang on to their cherished beliefs — even in the face of overwhelming contradiction. That’s why recantations — that is, public acts of refuting a previously held opinion — are so rare. This year, however, has presented several notable changes of heart where Bitcoin (BTC) and other cryptocurrencies were concerned — abetted, perhaps, by BTC’s climb to record price levels. Here are eight of the year’s more memorable turnarounds.
Nouriel Roubini, Economist
Crypto’s most ferocious critic recanted in 2020. Roubini, an NYU professor of economics who gained fame by predicting the 2007–2009 housing bubble, has in recent years heaped scorn on cryptocurrencies and blockchain technology in general.
What he said in 2018: Part of Roubini’s testimony for the United States Senate went viral: “Crypto is the mother of all scams and (now busted) bubbles.” He also called blockchain “the most over-hyped technology ever, no better than a spreadsheet/database” — and this was just the title of his testimony.
In his Senate visit, Roubini compared Bitcoin “to other famous historical bubbles and scams — like Tulip-mania, the Mississippi Bubble, the South Sea Bubble.” He noted that Bitcoin’s price increases had been two or three times larger than that of previous bubbles, followed by “ensuing collapse and bust as fast and furious and deeper.” At the time, Bitcoin was somewhat in the doldrums, selling at about $6,300.
What he said recently: In a Nov. 6, 2020 interview, Roublini admitted that Bitcoin — selling at about $15,500 at the time — might qualify as a “partial store of value,” primarily because of its algorithm that limits supply to 21 million BTC. Of course, Roubini also declared that Bitcoin “is not scalable, it’s not secure, it’s not decentralized, it’s not a currency,” and that it would be made irrelevant or “crowded out” within three years by central bank digital currencies.
Still, everything is relative. The professor’s partial pullback prompted economic historian Niall Ferguson to comment: “If I were as fond of hyperbole as he [Roubini] is, I would call this the biggest conversion since St. Paul.”
Don’t Fall For The Bitcoin Bubble, Even The Flintstones Had A Better System, Warns Economist Nouriel Roubini
Cryptos cannot protect investors from tail risks, says the Stern School of Business, NYU economics professor.
More than two years after warning U.S. lawmakers that cryptocurrencies are “the mother of all scams and bubbles,” economics professor Nouriel Roubini remains a hater.
“Since the fundamental value of bitcoin is zero and would be negative if a proper carbon tax was applied to its massive polluting energy-hogging production, I predict that the current bubble will eventually end in another bust,” Roubini wrote in an opinion column for the Financial Times on Wednesday.
Since his October 2018 warning, bitcoin BTCUSD, 3.53% has surged more than 600% and is currently hovering at $45,000, up nearly 60% so far this year. A recent leg higher briefly took bitcoin to $48,000 on Tuesday, sparked by a $1.5 billion investment from electric-car maker Tesla TSLA, +0.55%. The company also referenced plans to accept future payments in bitcoins.
Acknowledging Tesla, Roubini said bitcoins are still “barely used by legitimate companies.” He also harked back to the last bitcoin bubble of 2017-18, when the cryptocurrency went from $1,000 to $20,000 then back to $3,000.
And don’t even refer to cryptocurrencies as “currencies,” as almost nothing is priced in them, he said. “They are not a scalable means of payment: with bitcoin you can do five transactions per second while the Visa network does 24,000.”
Then there is the volatility, which can wipe out profits within hours and the fact that relying on cryptocurrency tokens marks a return to the Stone Age, a dig he’s made before. Invoking that “modern Stone Age” cartoon family, he said even the Flintstones “had a more sophisticated monetary system based on a benchmark” — shells.
Crypto, he says, is “only a play on a speculative asset bubble, worse than tulip-mania, as flowers had and still have utility. Its store of value against tail risks is unproven. And worse: some cryptos, dubbed “‘shitcoins,’ are financial scams in the first place or debased daily by their sponsor,” said the professor of economics at New York University’s Stern School of Business and chairman of Roubini Macro Associates.
And cryptocurrencies won’t “decentralize finance, provide banking services to the unbanked, or make the poor rich,” because the mining of bitcoins, for example, is mostly controlled by oligopolistic miners, in far-flung places such as Russia, China or Belarus.
Neither will bitcoin nor its rivals provide that safe haven investors are looking for — hedges against inflation, weak currencies and tail risks amid loose monetary policy, financial crisis and geopolitical stress. “Gold, inflation-based bonds, commodities, real estate and even equities are all reasonable candidates,” Roubini wrote.
No doubt bitcoin has plenty of fans out there, including billionaire investor Mark Cuban, who described some crypto assets as digital stores of value in a January blog post.
Biden And Yellen Will Crack Down On Crypto ‘Criminal Cesspool’ — Nouriel Roubini
In his latest ill-fated tweet, “Dr. Doom” Roubini spells out the death of cryptocurrency again, just as XRP gains 35% and Bitcoin aims for new all-time highs.
Bitcoin (BTC) naysayer Nouriel Roubini believes that incoming U.S. president Joe Biden will go much further than Donald Trump in controlling cryptocurrency.
In a fiery Twitter debate on Dec. 24, Roubini, who is known for both his dislike of crypto and his ability to call market bottoms by mistake, called the sector a “cesspool.”
Roubini to pro-Bitcoin lawyer: “You are delusional”
Roubini was responding to Jake Chervinsky, a lawyer studying the fallout from the recent news that U.S. lawmakers were demanding that stablecoin payments implement on-chain Anti-Money Laundering and Know-Your-Customer (AML/KYC) identification processes.
Chervinsky argued that the idea currently had “exactly zero chance” of becoming an enforceable law. Rather, it represented the “personal views” of Steven Mnuchin, the Treasury Secretary under Trump soon to be replaced by Biden’s pick, Janet Yellen.
“You are delusional,” a visibly irate Roubini retorted.
“Biden’s team, starting with Yellen who was my boss at CEA, will crack down on this criminal tax evading & AML-KYC-TFC-evading crypto/shitcoins cesspool much more than Mnuchin. Get a life as you have become a crypto hired gun cheerleader/enabler.”
Bitcoin and altcoins refuse to die this year
Cryptocurrency skeptics have been buoyed this week by news that U.S. regulator the Securities and Exchange Commission (SEC) had decided to file a lawsuit against blockchain payments network Ripple. The largest investor in the fourth-largest cryptocurrency, XRP, Ripple saw a 60% drop in the value of the token once the news became public.
At the same time, commentators noted that Bitcoin had barely reacted to the legal challenge. In the long term, however, surveys have shown that many remain concerned about the potential for government bans to impact Bitcoin’s success.
Proponents argue that this is impossible. The most effective way of reducing demand for a fully-decentralized asset, they claim, is for governments to reintroduce free markets on a sound monetary standard such as gold — an unlikely eventuality.
“Bitcoin can’t be easily banned,” Saifedean Ammous, author of “The Bitcoin Standard,” summarized last year.
“If people want to use it, they’ll find a way. If you want to stop it, you want to undermine the incentive to use it. Nothing would do that like a free market in banking based on a gold standard.”
Meanwhile, the outlook for Roubini if he continues his current lambasting of Bitcoin and altcoins looks bleak. As data shows, his outbursts have almost exactly matched local price lows for BTC/USD, making the economist an accidental bellwether for those looking to enter the market to profit.
Fellow detractor Peter Schiff has a similar track record when it comes to Bitcoin itself.
Bitcoin Bloodbath: Nouriel Roubini Slams Institutional Investors Of ‘Fomo’
American economist Nouriel Roubini on May 19 criticised the institutional investors who invested in volatile pseudo-asset ‘Bitcoin’ which according to him has no intrinsic value. He also sought that those investors be fired on the spot.
The following reaction by the New York University’s Stern School of Business professor comes amid reports of cryptocurrency Bitcoin down by almost 20 percent over the past 24 hours and down to $36,900.
Cryptocurrency bloodbath underway; Bitcoin now down almost 20% over past 24 hours
“Bitcoin falls more than 40% from its peak in less than one month. Which institutional investors are reckless enough to invest in such a risky and volatile pseudo-asset with no intrinsic value? They should be fired on the spot if undertaking such a reckless speculative gamble!” Nouriel Roubini wrote on Twitter.
Bitcoin falls more than 40% from its peak in less than one month. Which institutional investors are reckless enough to invest in such a risky and volatile pseudo-asset with no intrinsic value? They should be fired on the spot if undertaking such a reckless speculative gamble!
— Nouriel Roubini (@Nouriel) May 19, 2021
This is not the first time the economist has said against cryptocurrency. Roubini on February 23 had said that retail investors with “fear of missing out” are going to get crushed by investing in Bitcoin during its latest run higher, reported Yahoo Finance.
“We have, like in 2017, hundreds of thousands of retail suckers that are having FOMO (fear of missing out) going into this asset class. And they are going to buy it at peak like it happened in December of 2017 when it was $20,000 and fell to $3,000 by the end of the next year. So, it’s the same phenomenon — just people are moving in because of FOMO, feeding the bubble, manipulation, eventually, they’ll get crushed,” Yahoo Finance reported Roubini as saying.
The NYU Stern professor of economics had even argued that Bitcoin’s surge is driven by “massive manipulation,” not a rush into a hedge against inflation.
In December 2020, Nouriel Roubini dubbed Bitcoin and other cryptocurrencies as “sh-tcoins,” which according to him have no place in retail or institutional investor portfolios.
“First of all, calling it a currency — it’s not a currency. It’s not a unit of account, it’s not a means of payment.…it’s not a stable store of value. Secondly, it’s not even an asset,” Roubini said.
Among others who have spoken openly on the recent downfall of bitcoin’s value include Capital Mind founder Deepak Shenoy. He compared the market cap downsize to half of RBI’s forex assets. “Bitcoin’s market cap is down some $300 billion+ in a week. That’s like half of RBI’s forex assets,” Shenoy wrote on Twitter.
Here’s What Monk Entertainment Founder Viraj Seth Wrote:
Every Time Bitcoin Hits An All-Time High:
“Wish I could’ve bought more”
Every time Bitcoin goes down:
“Yeah let’s wait for it to go down more”
Average life cycle of a HODLer.
— Viraj Sheth (@viraj_sheth) May 19, 2021
Expressing his views on cryptocurrency and bitcoin, founding partner of Mobius Capital Partners — Mark Mobius — had said on May 18 that he doesn’t like is cryptocurrency and called it a “very risky area.”
Mobius had said that it’s difficult to predict the direction of cryptocurrency prices and questioned how easy it is to convert bitcoin and other cryptocurrencies into “real money” that people can spend, reported CNBC. He continued to share his disagreement with suggestions that bitcoin could replace gold as a hedge against inflation.
“I can’t have a crypto ring whereas I can have a gold ring —that’s the real difference,” CNBC quoted Mobius as saying.
“It’s a completely different situation and I don’t know understand why people say that bitcoin can be like gold, it’s completely different. Gold is gold and it’s something physical, whereas bitcoin is not,” he added.
The following decline in the two most traded cryptocurrencies were sparked last week by Elon Musk’s reversal on Tesla taking bitcoin as payment, followed by other tweets that caused confusion over whether the carmaker had shed its holdings of the currency.
Apart from this, China’s announcement on Tuesday that it is banning financial institutions and payment companies from providing services related to cryptocurrency transactions, coupled with a warning to investors against speculative crypto trading, seemed to have exacerbated the selling.
Stanley Druckenmiller, Investor
Investor and hedge fund manager Stanley Druckenmiller — the man who “broke the Bank of England” along with George Soros in 1992 by betting against the British pound — appeared to abandon his previous crypto skepticism in 2020.
What he said then: “I look at Bitcoin as a solution in search of a problem,” Druckenmiller told the Economic Club of New York in June 2019. “I don’t understand why we need this thing. […] I wouldn’t be short it, I wouldn’t be long it. […] I don’t understand why it’s a store of value.”
What he says now: In November 2020, worried about the United States Federal Reserve’s Covid-related stimulus efforts, Druckenmiller told CNBC that he now likes Bitcoin as a hedge against inflation, perhaps even more than gold:
“It has a lot of attraction as a store of value both to Millennials and the new West Coast money. […] It’s been around for 13 years and with each passing day it picks up more of its stabilization as a brand. […] Frankly, if the gold bet works, the Bitcoin bet will probably work better because it’s thinner, more illiquid and has a lot more beta to it.”
Billionaire Druckenmiller Says Ledger-Based System Could Replace USD Worldwide
Billionaire Stanley Druckenmiller thinks some kind of crypto-derived ledger system may replace the U.S. dollar as the world’s reserve currency in the future.
Billionaire hedge fund manager Stanley Druckenmiller has forecast the possibility of a crypto-derived ledger system overtaking the U.S. dollar as a global reserve currency.
The hedge fund boss noted that if there were to be a U.S. dollar replacement it “would be some kind of ledger system invented by some kids from MIT or Stanford or some other engineering school that hasn’t even happened yet, that can replace the dollar worldwide.”
He made the comments in an interview with CNBC’s Squawk Box. Druckenmiller noted that crypto is often promoted as a hedge against inflation, which has become more relevant of late:
“Well, you probably don’t remember this joke, but five or six years ago, I said that that crypto was a solution in search of a problem. And that’s why I didn’t play crypto the first wave because we already have the dollar. What do we need to look for?”
But he went on to add that ongoing financial stimulus was an issue: “Well, the problem has been clearly identified. It’s Jerome Powell and the rest of the world, central bankers. There’s a lack of trust. So sort of groping for an answer for a central case.”
Druckenmiller reportedly invested in Bitcoin earlier this year and told Squawk Box that it’s unlikely that he believes it’s Bitcoin will be usurped by other cryptocurrencies as the top store of value asset:
“It’s going to be very hard to unseat Bitcoin, as a store of value asset, because it has a 14 year old brand, it’s been around long enough, and obviously, there’s a finite supply.”
Druckenmiller noted that while Ethereum is leading the way when it comes to building smart contracts, he does not see it dominating everyday transactions. He believes that the next generation of developers is likely to improve on current blockchain technology leaving current solutions behind.
“The quality of the competition that’s going to come against the incumbents in this space is going to be brutal,” he said. “That’s why I think it’s just too early to call who is going to be the winner when it comes to the payment system, commerce, that kind of stuff.”
Druckenmiller doesn’t see alternative fiat currencies taking over from USD however because “Europe is a complete mess,” and “Who’s going to trust the Chinese?”
Larry Fink, CEO of BlackRock
More institutional investors began to notice crypto in 2020. Larry Fink, CEO of BlackRock, the world’s largest asset manager, told the Council on Foreign Relations in December regarding Bitcoin: “Many people are fascinated about it, many people are excited about it.” His remarks came less than two weeks after Rick Rieder, BlackRock’s chief investment officer of fixed income, told CNBC that “Bitcoin is here to stay. […] Bitcoin will take the place of gold to a large extent.”
What he said in 2017: Speaking at a meeting of the Institute of International Finance shortly after BTC reached its all-time high above $5,800 in October 2017, Fink said: “Bitcoin just shows you how much demand for money laundering there is in the world. […] That’s all it is. It’s an index of money laundering.”
What he says now: In his dialog at the Council of Foreign Relations, Fink said, “We look at it as something that’s real,” adding that among three topics discussed recently on BlackRock’s website — COVID-19, monetary policy and Bitcoin — the hits for each topic were 3,000 on COVID, 3,000 on monetary policy, and 600,000 on Bitcoin. “What that tells you is that Bitcoin has caught the attention and the imagination of many people,” said Fink, adding that BTC was still untested and comprised a very small slice of overall asset markets.
Niall Ferguson, Economic Historian
Ferguson, senior fellow at the Hoover Institution at Stanford University, is one of the world’s best-known economic historians. Author of The Ascent of Money, he has been weighing in on crypto as far back as 2014 — and not always favorably.
What he said in 2014: Digital currencies are a “complete delusion.”
What he says now: “Bitcoin and China are winning the COVID-19 monetary revolution.” That, at least, was the headline he wrote in an opinion piece for Bloomberg in late 2020, which had as a subheading: “The virtual currency is scarce, sovereign and a great place for the rich to store their wealth.”
To be fair, Ferguson backpedaled on his “Crypto is a delusion” remark in early 2019, and even joined a blockchain project, Ampleforth, that year. However, his recent screed suggests he has gone even further now — reconstituting himself as a fully fledged Bitcoin bull. “Bitcoin is gradually being adopted not so much as a means of payment but as a store of value,” he wrote.
Two features were particularly attractive, in Ferguson’s view: Bitcoin’s limited supply (“Built-in scarcity in a virtual world characterized by boundless abundance”) and its sovereignty (“users can pay without going through intermediaries such as banks. They can transact without needing governments to enforce settlement”).
Jim Cramer, Financial Media Pundit
When Bitcoin went on a tear back in December 2017, CNBC’s Jim Cramer was unimpressed. “Bitcoin’s not going to replace gold anytime soon,” he assured viewers. Three years later, Cramer has recalibrated. Maybe he was living too much in the past, he confided to Anthony Pompliano in a Sept. 15 podcast: “I have to start recognizing that maybe I am using a typewriter.”
What he said: “Sooner or later, this thing [Bitcoin] is going to run out of steam,” Cramer predicted in a 2017 Mad Money segment titled, “Is Bitcoin the New Gold Alternative?” outlining five reasons he was suspicious of BTC: 1) No one knows who invented it; 2) No one knows how much the creator(s) kept for themselves; 3) The network lacks transparency; 4) It has no government support; and 5) It is based on nothing but software, which can be hacked.
What he says now: “It’s perfectly logical to add crypto to the [inflation hedge] menu,” along with real estate, art masterpieces and gold, Cramer told Pompliano while voicing his concerns about recent COVID-related stimulus activity that might be inflating the United States dollar. What Cramer liked about Bitcoin “is the scarcity of it. […] My kids when they get my inheritance won’t feel comfortable with gold [but they] will feel comfortable with crypto.”
Dan Schulman, CEO of PayPal
In late October, PayPal Holdings Inc. announced that it would allow users to buy, sell and hold Bitcoin, Ether (ETH), Bitcoin Cash (BCH) and Litecoin (LTC), as well as use these cryptocurrencies for payment at its 28 million merchants globally. This marked a new leaf for the giant payments firm and its CEO, Dan Schulman.
What he said in 2018: Crypto’s volatility “makes it unsuitable to be a real currency that retailers can accept,” Schulman told TheStreet in 2018. “I think you need to separate out the Bitcoin or cryptocurrencies as currencies and the underlying protocol called blockchain.”
What he says now: “There’s no question that people are flocking to digital payments and digital forms of currency,” Schulman told CNBC.
So, how can Schulman’s and PayPal’s new stance be explained? In 2020, PayPal was reportedly feeling some heat from another payments firm, Square, which for several years has allowed BTC purchases through its profitable Cash App unit.
Indeed, only two weeks before PayPal’s Oct. 21 crypto announcement, Square declared that it had purchased $50 million in Bitcoin for its corporate treasury. By comparison, PayPal and Schulman had been more cautious regarding cryptocurrencies.
With the COVID crisis, however, the use of cash has “declined precipitously — something like 40–70%,” the PayPal CEO told Squawk Box co-anchor Andrew Ross Sorkin in November. As noted, PayPal will allow customers to use crypto as a funding source for transactions in any of its merchant sites as of early 2021, but the firm will first convert the crypto into fiat currency before paying retailers.
PayPal, not retailers, in other words, will be assuming the crypto’s price volatility risk.
Izabella Kaminska, Financial Journalist
On the matter of Bitcoin, “financial journalists, too, are capitulating,” noted Ferguson. In late November, “the Financial Times’s Izabella Kaminska, a long-time cryptocurrency skeptic, conceded that Bitcoin had a valid use-case as a hedge against a dystopian future.”
What she said in 2016: Writing in the Financial Times, which she joined in 2008 and for which she is the editor of FT Alphaville, Kaminska declared: “What is clear is that thus far the technology which was supposed to be revolutionizing finance and making it more secure (oddly, by skirting regulations) is looking awfully like the old technology which ran the system into the ground.”
What she says now: “Was all the trouble of creating it [Bitcoin] really worth while? Surprisingly, for a long-term critic, I’m going to say yes,” Kaminska wrote in a Nov. 24, 2020 FT piece.
What changed? Not Kaminska’s fundamental view of the cryptocurrency, at least. BTC remains “an intrinsically volatile and inelastic form of money” and is unlikely to ever become a widely used form of currency. “Yet there is one scenario that changes everything: a world in which no government is prepared to stand up for true civil liberties or free enterprise,” she wrote.
Such a scenario seemed far-fetched only a year ago, but with the COVID-19 crisis, it’s now at least imaginable. For a future “in which the world slips towards authoritarianism and civil liberties cannot be taken for granted […] Bitcoin’s anonymous security acts as a hedge against the worst of dystopian realities” — that is, as a sort of doomsday contingency system — and for that, “I am glad someone created Bitcoin.”
Ray Dalio, Hedge Fund Founder
What he said in 2017: “Bitcoin is a bubble,” Dalio told CNBC. He claimed the token’s volatility makes it a poor store of value, and a holder would be hard-pressed to spend it anywhere. “Bitcoin is a highly speculative market.”
What he says now: In his Dec. 8 Reddit “Ask Me Anything” session, Dalio opined that Bitcoin might now serve effectively as a “diversifier to gold,” given BTC’s limited supply and its mobility — unlike real estate, for example. Like some other investors who have reversed their positions on crypto recently, Dalio was worried about the “depreciating value of money” in the post-pandemic global economy.
Gaining Traction As A Store Of Value
Indeed, if there is one thread running 2020’s recantations, it’s fear of inflation in the wake of economic stimulus measures taken by governments to avoid post-COVID economic collapse. Bitcoin may or may never become a useful medium of exchange, but it has clearly gained traction as a store of value, as its former critics now concede.
Ray Dalio Does 180 On Bitcoin, Calls It ‘One Hell Of An Invention’
The founder of Bridgewater Associates admits Bitcoin and cryptocurrencies could be a viable hedge against inflation.
Ray Dalio, the famed founder of Bridgewater Associates, called Bitcoin (BTC) “one hell of an invention,” adding that he’s considering digital-asset investing for clients wishing to protect against currency debasement.
In a note to clients that was obtained by Bloomberg News, Dalio called Bitcoin’s store-of-value characteristics an “amazing accomplishment” and one of the few “alternative gold-like assets at this time of rising need for them.”
“To have invented a new type of money via a system that is programmed into a computer and that has worked for around 10 years and is rapidly gaining popularity as both a type of money and a storehold of wealth is an amazing accomplishment.”
Bridgewater Associates is the world’s largest hedge fund, with assets under management of roughly $160 billion. The firm is trusted by institutional investors and other high-net-worth individuals to produce steady returns regardless of the market environment.
Like other hedge fund managers, Dalio has been critical of Bitcoin in the past. In November 2020, he criticized BTC for its excess volatility, claiming that it could never be an effective medium of exchange or store of value. He quickly retracted his statement as Bitcoin’s price surged toward new all-time highs.
“I might be missing something about Bitcoin so I’d love to be corrected,” he said in a Nov. 17, 2020 tweet.
I might be missing something about Bitcoin so I’d love to be corrected. My problems with Bitcoin being an effective currency are simple… (1/5)
— Ray Dalio (@RayDalio) November 17, 2020
In his note to clients, Dalio admitted that Bitcoin has succeeded in “crossing the line” from a speculative idea to an asset with real value. He indicated that Bridgewater is focused on providing alternative stores of value via alt-cash funds that can protect investors from currency devaluation.
“Bitcoin won’t escape our scrutiny,” he said.
Dalio Expects To Soon Offer Alt-Cash Fund, Says ‘Bitcoin Won’t Escape Our Scrutiny’
“Bitcoin looks like a long-duration option on a highly unknown future,” the Bridgewater Associates founder said.
Citing the need to deal with the “devaluation of money and credit,” the founder and co-chairman of the world’s largest hedge fund said he expects the firm to soon offer an alt-cash fund and a storehold of wealth fund and said, “Bitcoin won’t escape our scrutiny.”
* Calling bitcoin “one hell of an invention,” Bridgewater founder Ray Dalio appears to have warmed a bit further to the largest cryptocurrency, saying it or its rivals could fill the growing need for alternatives to gold.
* While still expressing concern that bitcoin could be hacked and that governments could ban it should it become too successful, the legendary hedge fund manager bestowed praise on the cryptocurrency in a daily newsletter, saying, “I greatly admire how Bitcoin has stood the test of 10 years of time, not only in this regard but also in how its technology has been working so well and has not been hacked.”
* But even with his latest comments and his recent agreement to deliver a keynote at CoinDesk’s Consensus conference in late May, Dalio is far from a full-on bitcoin convert. He said his fund ran some “what-if” scenarios on bitcoin including what would happen if governments decided to ban it.
* Those scenarios, Dalio said, “paint a picture that is highly uncertain. That is why to me bitcoin looks like a long-duration option on a highly unknown future that I could put an amount of money in that I wouldn’t mind losing about 80% of.”
* Dalio repeated his recent statement that he’s eager to be corrected about bitcoin and learn more.
Hedge FUD Manager: Ray Dalio Says ‘Good Probability’ Of A US Bitcoin Ban
The U.S. could repeat its 1930s ban on gold ownership but for Bitcoin.
As the Bitcoin correction deepens, the fear, uncertainty, and doubt has returned, with billionaire hedge fund manager Ray Dalio adding a whole bunch more of it.
In an interview with Yahoo Finance’s editor-in-chief on March 24, the founder of the $150 billion hedge fund Bridgewater Associates stated that there is a “good probability” that the U.S. government could ban Bitcoin just as it did with gold ownership in the 1930s.
That happened because government leaders at the time did not want gold to compete with fiat money and credit as a store of wealth, Dalio added.
“They don’t want other monies to be operating or competing because things can get out of control. So I think that it would be very likely that you will have it, under a certain set of circumstances, outlawed the way gold was outlawed.”
The billionaire hedge fund manager and philanthropist, who called Bitcoin “one hell of an invention” and compared it gold in January, pointed out that India’s government is already trying to ban Bitcoin and cryptocurrency trading in general. He added that he is not an expert but asserted that it can be tracked and the government can work out who is dealing with it.
However, there was a little light at the end of Dalio’s gloomy outlook when he acknowledged BTC has stood the test of time as an asset class.
“Bitcoin has proven itself over the last 10 years, it hasn’t been hacked. It’s by and large, therefore, worked on an operational basis. It has built a significant following. It is an alternative, in a sense, storehold of wealth. It’s like a digital cash. And those are the pluses.”
On March 16, Dalio stated that the U.S. government could target those ditching the dollar for Bitcoin as it becomes “inhospitable to capitalism” in preparation for “shocking” tax changes to tackle the national debt crisis.
The comments come as Bitcoin’s correction continues to deepen as signs that the bull market is entering its latter stages have emerged on-chain. BTC has corrected by 13.5% from its all-time high of $60,100, to current prices of around $52,000.
Bridgewater Founder Ray Dalio Raises Inflation Concerns Over Federal Spending
Hedge-fund manager says Biden’s economic plans risk devaluing U.S. dollar but largely dismisses claims that federal jobless aid is slowing recovery.
Ambitious government spending raises the risks of inflation and a devaluation of the U.S. dollar, Ray Dalio, founder and co-chairman of Bridgewater Associates, said Tuesday during The Wall Street Journal’s Future of Everything Festival.
Mr. Dalio said the Biden administration’s economic agenda, which includes the $1.9 trillion Covid-19 relief bill signed in March and a proposal for $2.3 trillion in infrastructure spending, risks creating a bubble with too much money flowing into the economy. He also predicted there wouldn’t be enough demand from bond buyers to purchase new government debt, which would lead the Federal Reserve to continue its expansionary policies.
“The big issue is the amounts of money that have been produced and put into the system,” Mr. Dalio said. Such risks have to “be balanced carefully. Productivity is the key” to keeping the economy from overheating, he said. Mr. Dalio said he has spoken with Biden administration officials but declined to elaborate.
He described current stock-market valuations as a bubble, though not one driven by debt.
“There’s two types of bubbles,” Mr. Dalio said. “There’s the debt bubble when the debt time comes back and you can’t pay for it, and then you have the bubble bursting. And the other kind of bubble is the one where there’s just so much money and they don’t tighten it as much, and you lose the value of money. I think we’re more in the second type of bubble.”
Less concerning, he said, are the enhanced federal unemployment benefits that some business leaders and lawmakers have criticized as overly generous and discouraging Americans from returning to the workforce. While those payments “have been greater than the benefits, in some cases, of working,” he said that ending the $300-a-week supplemental payments before September, when they are set to run out, amounted to “splitting hairs.”
Mr. Dalio, who has spoken often about the investing opportunities available in China, pushed back on the idea that human-rights concerns, such as the Chinese government’s crackdowns on pro-democracy activists in Hong Kong and its repression of Uyghurs, a largely Muslim ethnic minority group, should keep investors away from the country.
“I don’t really understand, and I don’t study the human-rights issues. I follow what the laws are on those particular things,” he said, adding that there are human-rights concerns in the U.S. as well. “Would I not invest in the United States because of those?”
Mr. Dalio, who helped build Bridgewater into the largest hedge-fund firm in the world, is known for promoting algorithms and software to automate elements of both trading and workplace culture. But the applications of advanced technologies remain limited, he said, adding that artificial intelligence is currently striving for the intelligence level of “a five-year-old.”
While automation tools can raise productivity, he said, such technology “also has implications for jobs and employment, and that system has not been worked through.” Those issues are policy questions, not ones for individual companies to try to solve, he said.
“Can you make the pie grow well and then divide it well so that it provides equal opportunity? That’s a policy question which hasn’t yet been taken on.”
Asked about Robinhood Markets Inc.—the popular online brokerage that many individual investors recently used to trade GameStop and other shares, squeezing hedge funds in the process—Mr. Dalio said the trading app had, on the whole, changed the world of investing for the better.
“It’s information. It allows you to play the game. And there’s nothing like doing it in amounts you can afford,” he said. “It’s a real plus, but it has some drawbacks, too.”
Ray Dalio, Wall Street’s ‘Oddest Duck,’ Shares The Bitcoin Mind
Much of Ray Dalio’s investment philosophy may already sound familiar to the hardest of hard-nosed bitcoiners.
Much of Ray Dalio’s investment philosophy may already sound familiar to the hardest of hard-nosed bitcoiners. It’s a point worth raising, considering Dalio’s long-standing view that bitcoin is bubble-prone and a possible target for government sanctions.
The founder of what’s regularly called the world’s largest hedge fund by assets, Bridgewater Associates, which runs algorithmic strategies for mega-corporations, sovereign wealth funds and state pension plans, takes a macro view of global finance. And much of its success, Dalio says, lies in the founder’s heterodox view of money and credit.
“Most of what people think is money is really credit, and it does disappear. As implied by this, a big part of the deleveraging process is people discovering that much of what they thought was their wealth isn’t really there,” Dalio wrote in a 2008 blog post, titled “How the Economic Machine Works and How It Is Reflected Now,” during the height of the financial crisis and updated in 2011.
Bitcoiners, by contrast, in the extreme, believe fiat money – or money that has value because it’s backed by state authority – is illusory. Bitcoin is a monetary framework created as an alternative to a system where the Federal Reserve can print endlessly and private banks can increase the money supply by issuing loans. Bitcoin is a machine with brakes.
Dalio saw how the economic machine could malfunction. As early as 2006 he diagnosed a financial system buoyed by money printing and reliant on highly-leveraged positions for returns. Debt exceeded income. His firm calculated there was some $839 billion in bad debt in the U.S. that could implode, a figure he took to the U.S. Treasury Department in early 2007 as an unheeded siren’s song.
What’s more, Dalio figured that heavily indebted countries only had one way out of the hole: printing more money to finance their public and private debts. Beyond devaluing the currency, money printing would drive down interest rates and force investors into safer, hedge assets.
“Bitcoin won’t escape our scrutiny.”
“There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he told the New Yorker in 2011. (A sentence that could have been uttered by crypto doyen Meltem Demirors.)
Bridgewater’s flagship Pure Alpha fund (named for the rate money earns above normal market returns) positioned itself defensively ahead of the 2008 crisis. It went long on Treasury bonds, shorted the dollar and bought gold and other commodities.
When the housing market collapsed, Bridgewater did more than weather the ensuing crisis. Pure Alpha returned about 9.5% in 2008, 45% in 2010 and 23% in 2011 – years when the average hedge fund may have been in the red. Its assets under management (AUM) doubled to $100 billion in 2011 from $50 billion at the beginning of the meltdown.
Dalio wasn’t alone in his views about monetary excess. Around the same time Bridgewater was shorting the dollar, Satoshi Nakamoto was coding Bitcoin. Its first block contained Bitcoin’s mission statement: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” Lo and behold, the world’s first digital, hard-capped financial network.
Once called “Wall Street’s oddest duck,” Dalio’s heterodox views have maintained his fund’s prime position. The $150 billion fund routinely beats market expectations in an industry where higher funds are hardly guaranteed. (It should be said, Dalio isn’t always bearish on the U.S. dollar.) Meanwhile, bitcoin, a whole other financial beast, was the best-performing asset of the past decade, with annualized returns of 230%.
What Then Might Explain The Odd Duck’s Pessimism On Bitcoin?
Dalio, who declined to comment for this article, considers himself a “hyperrealist,” or someone determined to understand the underlying mechanisms driving the world. He reads history, is skeptical of emotionally tinged thinking and sees evolutionary patterns across society. Investing, like wild game hunting, is a risky, zero-sum business – but one for which you could prepare to gain an edge.
His “Principles,” a book of about 300 hard-learned lessons and aphorisms, sometimes called the “Tao of Dal,” advocates for “radical transparency.” Every Bridgewater recruit is to read and internalize the message: the world is comprehensible, and some people can be more right than others. Meetings are recorded and reviewed. Underlings, reportedly, are encouraged to speak up against their supervisors – just not behind their backs. (Dalio famously punched his first real boss in the face.)
It’s this commitment to the truth-finding process that may have opened Dalio’s eyes to bitcoin. He turned to Reddit and Twitter to get lessons in finance. In the past several months, Dalio has gone on record saying there are inflationary forces afoot and the traditional financial system is edging on bubble territory. And despite previously saying bitcoin failed as an inflation hedge, he now says that “bitcoin won’t escape our scrutiny” for a new alt-cash fund.
Ray Dalio: ‘I Have Some Bitcoin’
The billionaire hedge fund boss sees an inflationary future where “cash is trash” and BTC catches on as a store of wealth. He still doubts governments will tolerate it.
Concerns about a looming global debt crisis have taken the world’s top hedge fund manager from doubting bitcoin (BTC) to dabbling in it.
Bridgewater Associates founder Ray Dalio said the U.S. dollar is on the verge of devaluation on a level last seen in 1971 and that China is threatening the greenback’s role as the world’s reserve currency. In such an environment bitcoin, with its gold-like properties, looks increasingly attractive as a savings vehicle, said Dalio, whose firm started 2021 with $101.9 billion in assets under management, making it the world’s largest hedge fund.
“Personally, I’d rather have bitcoin than a bond” in an inflationary scenario, Dalio said during an hour-long conversation with CoinDesk Chief Content Officer Michael J. Casey.
Now, his interest is more than hypothetical or academic.
“I have some bitcoin,” Dalio volunteered in the middle of the interview, recorded on May 6 and to be broadcast Monday during Consensus by CoinDesk 2021.
Dalio joins fellow billionaire Stanley Druckenmiller in not only expressing pessimism about the dollar but taking a position in bitcoin. Broadly, the traditional finance world has gone from ignoring or shunning to tentatively embracing cryptocurrencies, some looking to profit from their day-to-day volatility, others seeking a haven from inflation as governments swelled money supplies during the coronavirus pandemic.
Bridgewater’s chief financial officer, John Dalby, recently left the storied firm to join NYDIG, the bitcoin custodian and prime brokerage that facilitated insurance giant MassMutual’s $100 million crypto buy.
After expressing skepticism about the cryptocurrency as recently as November, Dalio began to show a change of heart this year. “There exists the possibility that bitcoin and its competitors can fill that growing need” for an alternative store of value, he wrote in January.
Dalio’s off-the-cuff remark to CoinDesk about owning “some” BTC represents the closest thing to an endorsement from him to date. Nonetheless, in the same conversation, he reiterated his concern that governments, fearing competition from bitcoin to state monetary systems, could crack down on its owners.
“Bitcoin’s greatest risk is its success,” Dalio cautioned.
The Debt Cycle
More than a decade ago, on the heels of the 2008 financial crisis (and during the nascent stages of Bitcoin), Dalio began studying the rise and fall of the three most recent global reserve currencies: the Dutch guilder, the British pound, and the U.S. dollar, he recounted.
As Dalio sees it, currency supremacy moves in three “cycles” that may occur simultaneously: the creation of debt and financial assets; an “internal cohesiveness clash cycle” (“as the wealth gaps grow and the value gaps grow – and political groups grow – you have a greater amount of conflict”); and the rise of another great power to challenge the existing top currency.
Whether a currency can withstand such cycles depends on the strength of the economy behind the global reserve currency.
The U.S. dollar is currently in the midst of the first cycle, where “debt and credit create buying power,” said Dalio, who is co-chairman and co-chief investment officer at Bridgewater.
Yet, these are short-term “stimulative” and long-term “depressants” because such things as government debts will eventually have to be paid back, he warned. Nonetheless, those debts are issued, but it gets increasingly difficult.
“All of those financial assets are claims on real stuff, real goods and services,” Dalio said. “And when the pile becomes very big, and the incentives for not holding that are no longer there, you have a problem.”
That happened to the U.S. once before, Dalio noted. After the 1944 Bretton Woods agreement, global exchange rates were tied to the dollar which, in turn, was backed by gold. However, in the 1960s federal spending skyrocketed due to an expansion of entitlement programs at the same time the U.S. was boosting its defense spending to battle the Soviets in the Cold War as well as pay the escalating costs of the Vietnam War.
The higher debt eventually caused a depletion of America’s gold reserves from about 20 metric tons in the late 1950s to under 10 metric tons by 1970. Sensing the situation was no longer tenable, President Richard Nixon took the U.S. off the gold standard in 1971. The dollar has been a “fiat” currency ever since.
The current situation now resembles 1971, Dalio warned.
“As you look at the budgets, and you look ahead, we know we’re going to need a lot more money, a lot more debt,” he said.
“You need to borrow money? You have to print that. You need more money? So, taxes go up and that produces a dynamic. Now I can keep going on about what happens in that dynamic. It may be capital controls. … I painfully learned in 1971 that it causes stocks to go up. It causes… gold, bitcoin, real estate, everything to go up, because it’s really going down in dollars. And that’s the part of the cycle we’re in.”
A major narrative surrounding bitcoin and other cryptocurrencies is that they serve as an inflation hedge, or at least will benefit from fiscal and monetary stimulus.
As governments around the world continue their attempts to stave off economic crises with more spending, much has been made about the prospects of inflation. In the 12 months ending April, the annualized inflation rate for the U.S. was 4.2%, well higher than the Federal Reserve’s 2% long-term target, though a large part of that was because the rate is being compared to April 2020, a month where many of the world’s economies ground to a halt.
There are two types of inflation, Dalio said: one caused by supply and demand, where labor demand is high and capacity is low, forcing prices up; and monetary inflation due to a devaluation of the currency.
As money gets pumped into the economy, it intertwines the two inflation types.
“We will have a hell of a lot of demand because we put all that money in cash all over the place,” said Dalio. At the same time as the money supply has increased, yields have fallen to lows as investors snap up bonds and other assets such as real estate.
“It’ll change the amount that is in the hands of individuals, and so on,” he said, “and that’ll move on because cash is trash. I mean, I’d say that because it’ll have that negative real return.”
It is that second, monetary type of inflation that will ultimately hold sway, according to Dalio. That could be good for assets such as real estate, stocks and cryptocurrencies, but only up to a point.
“As those prices rise – like a bond – their future expected returns go down,” he said. “As they come closer to the interest rate … then there’s no longer the incentive to buy those things. And you could have trouble. It becomes very difficult to tighten monetary policy, because the whole thing falls apart. Everything’s interest rate-sensitive.”
The central bank then has to resort to more money printing, he added, and that could eventually lead assets to have a negative real return despite nominal increases, as was seen in the 1970s.
China As Capital Competitor
Coming in to fill the vacuum of the dollar’s decline is China, which has done some fiscal stimulus and relatively muted monetary stimulus since the start of the pandemic.
The world’s most populous country is also being helped by loosening restrictions on foreign investment into the country, Dalio said.
“In 2015, only 2% of Chinese markets were open to foreigners. Now it’s over 60% [but] if you look at the relative pricing, and so on, it’s a whole different story because they’re not doing quantitative easing,” he said. “They still have an attractive bond market.
They have attractive capital markets that are more open. And as they’re more open, big investors – institutional investors, central banks, and so on – view themselves as underweighted there,” meaning their holdings in China are insufficient, relative to the returns they can generate.
A capital market drawing in investments can translate into added strength to the Chinese renminbi.
“When you buy a Chinese financial asset, like buying an American financial asset, you have to buy their currency. So it’s supportive to their currency and it’s also supportive to their assets,” said Dalio. He said China gains the capacity to bill and lend in its currency when there are capital inflows. “China has been very reticent to do that [so as] not to disrupt the system. But you’re seeing more of the internationalization of the renminbi. It has appeal for borrowers and lenders. … That dynamic is really following the same arc of monetary systems and empires pattern.”
Neutral Reserve Currency?
With one currency (the dollar) possibly on the wane while another (the renminbi) possibly ascendant, there is the chance a neutral cryptocurrency such as bitcoin could act as gold did in previous centuries.
While he suggested a diversified portfolio could include the oldest and largest cryptocurrency by market cap, there are risks many may not be considering, according to Dalio.
“One of the great things, I think, as a worry is the government having the capacity to control almost any of them, including bitcoin, or the digital currencies,” he said. “They know where they are, and they know what’s going on.”
Governments may start to worry should bondholders sell their bonds in favor of bitcoin. “The more we create savings in [bitcoin], the more you might say, ‘I’d rather have bitcoin than the bond.’ Personally, I’d rather have bitcoin than a bond,” Dalio said, chuckling. “And then the more that happens, then it goes into bitcoin and it doesn’t go into credit, then [governments] lose control of that.”
Such a situation could lead those governments to crack down on bitcoin holders.
One indicator, Dalio said, is the relative value of bitcoin versus gold. Excluding government reserves and jewelry uses, the value of gold is roughly $5 trillion, he estimated, about five times that of bitcoin. “It’s about 80/20 right now in the world, so that’s something I’d watch, too. But I think those things probably are going to rise relative to bonds.”
There is one scenario where rising debt can be overcome, and that’s through productivity. And while that’s harder to measure than before, it will hinge on technology, he said.
“The world is going to change at an incredibly fast pace,” Dalio said. “Whoever wins the technology race, wins it all, economically, and militarily. … That’s what the next five years looks like.”
Bridgewater’s Ray Dalio Says He Prefers Bitcoin To Bonds
Ray Dalio, founder of Bridgewater Associates, said he would rather own Bitcoin than a bond.
Should cryptocurrencies continue to gain traction, investors might decide to invest in them rather than government bonds, Dalio said in a recorded interview that was presented Monday at CoinDesk’s Consensus 2021 conference. The result is that governments lose control over their ability to raise money.
Dalio has been bearish bonds for some time, saying in March that the economics of investing in bonds “has become stupid” because they pay less than inflation. Even with that view, a large percentage of the $151 billion his firm manages is in U.S. Treasuries and other government bonds.
“I have some Bitcoin,” Dalio said in the interview, which was recorded on May 6, according to CoinDesk. He didn’t say how much he owned.
Dalio also said that Bitcoin’s “greatest risk is its success.”
The hedge fund manager has previously called Bitcoin “one hell of an invention” and that he found it challenging to put a value on digital assets since investing in Bitcoin means recognizing the potential to lose about 80%.
Dalio said in January he was considering cryptocurrencies as investments for new funds that would offer clients protection against the debasement of fiat money.
Bridgewater Associates has struggled to make money in its main macro fund. Last year, its Pure Alpha II fund lost 12.6% and it is up 4% this year through April. Overall, Bridgewater manages $73 billion across its macro strategies.
Cat Got Your Tongue? Bitcoin Critics Wither In 2020
Why have Bitcoin critics been so silent in 2020?
Bitcoin (BTC) has had an interesting year, recovering from major sell-offs to eventually skyrocket to new all-time highs.
However, Bitcoin’s performance and cryptocurrencies increased adoption worldwide have still failed to bring some observers into the crypto camp.
Yet compared to other bull run years like 2017, 2020 has seen much less crypto criticism, with a number of Bitcoin naysayers appearing to have somewhat softened their stance towards digital assets.
As we look back on crypto in 2020, Cointelegraph has noted some of cryptocurrency’s biggest critics.
“Bitcoin Has No Future”: Russian Politician Anatoly Aksakov
Date Of Quote: Oct. 23, 2020
Bitcoin Price That Day: $12,900
Anatoly Aksakov, a member of the Russian State Duma and a major representative of Russia’s crypto-related legislation efforts, was a noteworthy cryptocurrency critic in 2020.
The official is confident that the global adoption of payments in crypto like Bitcoin would result in a “destruction of a financial system.” In October 2020, Aksakov predicted that decentralized cryptocurrencies like Bitcoin have no future, arguing that central bank digital currencies, or CBDCs, are the future of the financial system.
While it remains to be seen what comes of Aksakov’s prediction about Bitcoin, some of his previous comments show that he isn’t exactly a prophet. In a May 2020 live stream talk with Maria Butina, Aksakov said that crypto mining “is becoming a thing of the past” due to Bitcoin’s third halving cutting the miner block reward from 12.5 BTC to 6.25 BTC.
“[Crypto mining] is not profitable anymore, and as far as I understand, this business is poised to disappear in future,” Aksakov argued. Despite this doom prediction, Bitcoin miners have come into some money over the course of 2020, with Bitcoin miner revenue surging to pre-halving levels as of early November.
In keeping with Russian authorities’ constant game of ping pong in regulating crypto, Aksakov regularly changes his stance on the industry. In early December, Aksakov called cryptocurrencies a “highly profitable business,” and stressed the need to legitimize it by recognizing crypto as property.
A member of Russia’s State Duma, Aksakov is also chairman of the National Banking Council at Russia’s central bank. In mid-October 2020, the Bank of Russia officially released its plans on the development of Russia’s CBDC, the digital ruble.
“Nothing Is Priced In Bitcoin Or Any Other Cryptocurrency”: Nouriel Roubini
Date Of Quote: Nov. 7, 2020
Bitcoin Price That Day: $14,900
Nouriel Roubini, a professor of economics at New York University’s Stern School of Business, is one of the world’s biggest crypto critics, often referred to as “Dr. Doom” in the crypto community.
Known for his claims that “cryptocurrency as a technology has absolutely no basis for success,” the award-winning economist has stayed firmly critical of crypto and Bitcoin in 2020 despite admitting that BTC “maybe is a partial store of value” in late 2019.
On Nov. 7, 2020, Roubini argued that cryptocurrency itself is a “misnomer,” because a currency needs to provide a unit of account. Roubini continued to bash Bitcoin, criticizing its apparent limited scalability:
“Nothing is priced in Bitcoin or any other cryptocurrency. You have to be a single numerator, and with so many tokens, you don’t have a single numerator. You have to be a scalable means of payment, and with Bitcoin, you can make only five transactions per seconds.”
At the same time, Roubini admitted Bitcoin’s potential function as a store of value. “It’s maybe a partial store of value, because, unlike thousands of other what I call shitcoins, it cannot be so easily debased because there is at least an algorithm that decides how much the supply of Bitcoin raises over time,” Roubini noted.
Bitcoin Is “The Biggest Bubble I’ve Seen”: Peter Schiff
Date Of Quote: Oct. 28, 2020
Bitcoin Price That Day: $13,200
Peter Schiff, a millionaire broker and CEO at Euro Pacific Capital, is another famous Bitcoin naysayer, criticizing Bitcoin as early as 2013. Also referred to as a “gold bug” in the crypto community, Schiff is also one of the world’s biggest proponents of gold investment.
Over the course of 2020, Schiff delivered multiple negative and controversial remarks about Bitcoin, predicting that gold will moon while Bitcoin will crash in the near future.
On Oct. 28, 2020, While Gold Plunged To Yearly Lows Against Bitcoin, Schiff Argued:
“If you measure the size of asset bubbles based on the level of conviction buyers have in their trade, the Bitcoin bubble is the biggest I’ve seen. Bitcoin hodlers are more confident they’re right and sure they can’t lose than were dotcom or house buyers during those bubbles.”
On Dec. 4, Schiff said that Bitcoin’s past performance does not guarantee its future success but rather “assures its future failure.”
Despite regularly criticizing Bitcoin, Schiff has not stayed away from the world’s largest coin completely. In January 2020, Schiff claimed that he lost access to his crypto wallet, noting that having BTC “was a bad idea.”
In August 2020, the gold advocate told people on Twitter to send BTC to his 18-year-old son, Spencer Schiff. “Since so many of you Bitcoin guys are ribbing me because my son bought Bitcoin, why not really rub it in by gifting him some as a belated birthday present,” Schiff wrote.
“I Can Trade Bananas Easier As A Commodity Than I Can Trade Bitcoin”: Mark Cuban
Date Of Quote: April 24, 2020
Bitcoin Price That Day: $7,500
Mark Cuban, a billionaire investor and owner of the NBA’s Dallas Mavericks, is another major crypto sceptic, calling Bitcoin a bubble back in 2017. While admitting that crypto could be a “reliable financial instrument,” Cuban did not stop criticizing Bitcoin in 2020 over its supposed complexity.
In an April 24 interview with Morgan Creek Digital’s Anthony Pompliano, Cuban reiterated his long-running stance that Bitcoin is too complicated to use. “It’d have to be completely friction-free and understandable by everybody first, and then you can say it’s an alternative to gold as a store of value,” he said.
Cuban stated that Bitcoin is a questionable means of exchange due to its apparent lack of fungibility for goods and services without converting into fiat currencies:
“I can trade bananas easier as a commodity than I can trade Bitcoin, and I can still eat that banana before it goes bad, and get all my potassium for my workout.”
Despite his criticism of Bitcoin, Cuban still owns a tiny bit of crypto. The billionaire investor claimed to have about $130 dollars in Bitcoin as of April 2020. Back in 2017, Cuban recommended investing up to 10% in cryptocurrencies like Bitcoin.
Mark Cuban Says He’ll Run For President If BTC Hits $1M
As president of the United States, the Dallas Mavericks’ owner says he would give away Bitcoin to every citizen.
Responding to a tweet from billionaire Chamath Palihapitiya, Mark Cuban said he would run as a U.S. presidential candidate, under a specific set of circumstances.
“I’ll run if BTC gets to $1m AND we can get commitments to donate 350 BTC to the Treasury each of the 4 yrs so that we can give 1 satoshi to every citizen each yr, that they must hold for 10 years,” the Shark Tank star tweeted on Tuesday.
Cuban’s response came after Palihapitiya said the present political framework needs fixing, forecasting “a viable third political party in the US by 2030.” Cuban subsequently questioned the whole concept of political parties. In turn, Palihapitiya said the U.S. would likely not need such parties if Cuban runs for office.
Cuban has spoken about Bitcoin several times over the past two years. Some of his most recent comments include a stance on the asset as “a store of value like gold that is more religion than solution to any problem,” and that “no matter how much BTC fans want to pretend that it’s a hedge against doomsday scenarios, it is not.”
At the core, Cuban’s overall view of Bitcoin is not too far off from the industry’s outlook on the coin. Both Cuban and crypto industry gurus see the digital asset as a store of value similar to gold.
Cuban has, however, previously called for greater user simplicity for the asset, as well as touching on several other points over the years. In contrast, crypto pundits see Bitcoin solving a plethora of issues, instead of simply acting as another store of value.
Mark Cuban Says Crypto Is ‘Exactly Like The Internet Stock Bubble’
But the statement wasn’t without a few bullish predictions for Bitcoin and Ethereum.
Billionaire entrepreneur Mark Cuban says the cryptocurrency market is “exactly” like the dot-com bubble of the late-1990s and early 2000s. His statement seems to signal that digital-asset valuations may implode once investor exuberance runs out.
“Watching the cryptos trade, it’s EXACTLY like the internet stock bubble. EXACTLY,” Cuban tweeted on Monday before offering a silver lining to crypto enthusiasts.
Watching the cryptos trade, it’s EXACTLY like the internet stock bubble. EXACTLY. I think btc, eth , a few others will be analogous to those that were built during the dot-com era, survived the bubble bursting and thrived, like AMZN, EBay, and Priceline. Many won’t
— Mark Cuban (@mcuban) January 11, 2021
Although the internet bubble didn’t end well for the vast majority of dot-com stocks, several rose from the ashes to form legitimate companies, Cuban said. Amazon, eBay and Priceline immediately came to mind.
Cuban’s seemingly positive outlook on the top two cryptocurrencies came even as he dispelled all the narratives surrounding monetary debasement and fiat currency. These are “just sales pitches,” he said, arguing that crypto valuations are based only on supply and demand.
As during the dot-com bubble “the experts” try to justify whatever the pricing of the day is. Crypto , much like gold , is a supply and demand driven All the narratives about debasement, fiat, etc are just sales pitches. The biggest sales pitch is scarcity vs demand. That’s it
— Mark Cuban (@mcuban) January 11, 2021
Cuban hasn’t quite gotten his story straight on Bitcoin. He once argued that bananas are a better medium of exchange than BTC and said the digital asset will act more like a collectible than a financial instrument.
But just last month, he praised Bitcoin’s monetary policy by arguing that public companies should “commit to not issue new shares of stock” ever. He was, of course, referring to Bitcoin’s capped supply of 21 million units hardwired into the code.
Crypto assets were in the spotlight again on Monday after the total market shed over $200 billion peak-to-trough. Zooming out, the total market capitalization has appreciated fourfold over the past year, with Bitcoin recently hitting all-time highs of around $42,000.
Mark Cuban Is More Into Crypto Than He’s Previously Let On
“I still have crypto from the early days of Coinbase. I’ve never sold anything.”
The billionaire who once said he prefers bananas to Bitcoin is now tossing around crypto terms on social media like an experienced HODLer.
In Twitter threads that were likely precipitated by his recent comments comparing crypto to the internet stock bubble of the late 1990s, Mark Cuban interacted with several high-profile crypto figures including Gemini co-founder Tyler Winklevoss, Gokhshtein Media founder David Gokhshtein, Tron CEO Justin Sun and others. The Dallas Mavericks owner discussed the issues surrounding supply and demand, the costs of moving crypto, and decentralized finance, or DeFi.
Just remember WITH DeFi, as with all derivatives, the RISK NEVER LEAVES THE SYSTEM. One segment collapses, they all face risk of collapse. https://t.co/47DsVwIJTF
— Mark Cuban (@mcuban) January 12, 2021
He debated Winklevoss over the nature of Bitcoin (BTC) and Ether (ETH), with the Gemini co-founder referring to the cryptocurrencies as networks, not assets like stocks. Cuban argued that the digital assets “trade more based off the narratives of sellers and supply and demand than any intrinsic value” and require users to convert the tokens to fiat to realize that value.
You are making my point. Supply and Demand is the ONLY thing that values BTC. As far as balance sheets and debasement, we disagree. One of the challenges of sovereign BSs is valuing IP, intangibles and cost based assets. But maybe you can tell me why inflation is minimal ? https://t.co/3ujTVFhlSx
— Mark Cuban (@mcuban) January 12, 2021
“My only mistake on Bitcoin in particular was underestimating your ability,” said Cuban, referring to Winklevoss. “You get credit for this, to create a narrative and generate demand for it. You are the King of Get Long and Get Loud for BTC and that’s not a bad thing.”
In addition, the Mavericks owner admitted to HODLing some crypto “from the early days of Coinbase,” seemingly around 2012 when the exchange was founded. This statement is somewhat at odds with one he made in 2019 after the Mavericks offered basketball fans the opportunity to pay for merchandise and tickets in BTC. At the time, Cuban estimated that the sales brought in $130, saying that was “all of the Bitcoin” he owned.
I don’t think people realize I try to test and use all this stuff and have for years. I still have crypto from the early days of coinbase. I’ve never sold anything
— Mark Cuban (@mcuban) January 12, 2021
The billionaire has been more outspoken about crypto and blockchain this year, around the same time Bitcoin was in the middle of a price rally leading it to an all-time high of more than $42,000. Last Tuesday, Cuban said — seemingly as a joke — that he will run for president of the United States if the price of Bitcoin reaches $1 million and officials agree to distribute the crypto asset to all American citizens.
Though the price of Bitcoin is more than $35,000 at the time of publication, Cuban’s statement gives the crypto asset around three years to rise roughly 3,000%. While such a feat is theoretically possible, it is probably unlikely.
Mark Cuban Talks Bitcoin HODLers And Blockchain Stocks In Recent AMA
“Stocks will be on the blockchain in the future,” predicted the billionaire.
Jumping on the r/Wallstreetbets subreddit for an “ask me anything” session recently, Dallas Mavericks owner Mark Cuban shared his thoughts on GameStop shorts, general investing and various crypto-related topics. The billionaire said “the game is changing” when it comes to stocks but encouraged the Redditors to look at Bitcoin (BTC) investors for guidance.
“BTC HODLers are a great example to follow,” said Cuban. “Many bought at the highs in 2017 and watched it fall by 2/3 or more. But they held on because they believed in the asset. The same applies to stocks. When I buy a stock I make sure I know why I’m buying it. Then I HODL until I learn that something has changed.”
A Bitcoiner himself, Cuban said his crypto portfolio includes Aave’s LEND, SushiSwap’s SUSHI, Ether (ETH), BTC and Litecoin (LTC). Last week, crypto sleuths were able to find at least two wallets connected to Cuban with more than 1,000 ETH, staked Aave and SUSHI. Upon being found out, Cuban admitted he had his “share of shitcoins.”
The Dallas Mavericks owner went on to say he believed decentralized finance and nonfungible tokens have the potential to explode in the next decade, “But there will be a lot of ups and downs along the way.” In addition, the billionaire said the infrastructure surrounding investments may even change:
“Stocks will be on the blockchain in the future, and that will make the markets much more efficient, transparent and available to the small investor.”
Cuban has been more active speaking about crypto since the winter as the Bitcoin bull run began and many media outlets began reporting on the ecosystem more often. Earlier this month, he compared crypto markets to the dot-com bubble of the late 90s and even said he would consider a presidential run if the price of Bitcoin hits $1 million.
However, many of the billionaire’s views on crypto are in line with participants in the industry. Cuban has referred to Bitcoin as a store of value like gold and recently suggested Redditors in the r/Wallstreetbets community have a better grasp on investments than the “slow” and “stale” practices of Wall Street investors.
“I think social investors have an opportunity to change stocks the way social was used to build crypto,” said Cuban on the Reddit AMA.
“I Don’t Think Digital Currencies Will Succeed In The Way People Hope They Would”: Ray Dalio
Date of quote: Nov. 7, 2020
Bitcoin price that day: $15,500
In a Nov. 7 interview with Yahoo Finance, Ray Dalio, American billionaire hedge fund manager and founder of Bridgewater Associates, claimed that he doesn’t see digital currencies like Bitcoin succeeding the way other people do. He also expects global authorities to “outlaw” Bitcoin if its price goes too high.
Dalio also criticized Bitcoin for not being an effective medium of exchange and a store of value, stating:
“Theoretically, Bitcoin is good, but there are three basic things: a currency has to be an effective medium of exchange, a storehold of wealth, and the governments want to control it […] I today can’t take my Bitcoin yet and buy things easily with it.”
Dalio Subsequently Admitted That He “Might Be Missing Something” About Bitcoin:
“I can’t imagine central banks, big Institutional investors, businesses or multinational companies using Bitcoin […] If I’m wrong about these things I would love to be corrected.”
Dalio has significantly softened his stance to Bitcoin, claiming that it could be a diversifier to gold on Dec. 8. The hedge fund veteran previously called the top cryptocurrency a bubble back in 2017.
Less People Criticized Bitcoin And Crypto In 2020
Despite a select number of well-known critics bashing Bitcoin in 2020, it appears that the seminal cryptocurrency has drawn less public skepticism than in previous years.
Prominent naysayers like Warren Buffett, Bill Gates and Donald Trump have largely remained silent about Bitcoin and crypto this year. Nobel Prize winning economist Paul Krugman, who predicted a “total collapse” of Bitcoin in 2018, refrained from commenting as well.
According to data by major Bitcoin-themed website 99bitcoins, 2020 has been the year with lowest Bitcoin “obituary” rate since 2013.
Only seven cases of “Bitcoin death” were reported in media monitored by 99bitcoins, compared to 41 “obituaries” in 2019, and 93 in 2018.
The biggest year for Bitcoin deaths was 2017, the last year in which Bitcoin saw a major bull run before 2020.
Whether one looks at Bitcoin’s withering critics, the growing interest of major banks and financial institutions in cryptocurrency, or the meteoric bull run this year, one thing seems clear: crypto is here to stay.
‘Cultish’ Bitcoin Comments By Nobel Prize Winner Strike At Heart Of BTC
Paul Krugman’s harsh comments touched on core development issues within the Bitcoin community.
Long-time cryptocurrency critic and Nobel Prize-winning economist Paul Krugman said in a string of tweets on Wednesday that Bitcoin (BTC) could very well survive indefinitely, but only as a fundamentally useless cult.
Krugman’s harsh words were prompted in response to Wednesday’s market plunge which saw numerous coins lose close to 50% in value, and resulted in close to $1 trillion in value departing the global market cap before a recovery bounce brought some of that sum back.
“I don’t write much about Bitcoin because there aren’t any fundamentals to discuss,” tweeted Krugman, who wrote about Bitcoin as early as 2013 in his New York Times blog, calling it “evil” at the time.
“BTC isn’t a new innovation; it’s been around since 2009, and in all that time nobody seems to have found any good legal use for it. It’s not a convenient medium of exchange; it’s not a stable store of value; it’s definitely not a unit of account,” continued Krugman, taking aim at the two use-cases generally attributed to Bitcoin: a means of payment, and a store of value.
While the crypto faithful may be quick to defend Bitcoin against any and all attacks (perceived or real), Krugman’s critique chimes with many figures in the cryptocurrency space who believe Bitcoin’s utility has been hamstrung in recent years by ill-conceived and misguided development decisions.
For example, Bitcoin’s average transaction fee rose to as high as $62.77 in late-April — a single statistic that causes Bitcoin’s attributed reputation as a day-to-day currency to dissipate before our eyes. This is largely because the Bitcoin block size is still limited to 1MB (third-party applications increase this figure somewhat), despite it being capable of much higher transaction throughput.
The block size debate caused a rift in the Bitcoin community in 2017 and saw a big-block faction break away to form Bitcoin Cash (BCH). Bitcoin Cash increased the foundational protocol’s block size to 8MB and then 32MB in pursuit of achieving the vision of peer-to-peer electronic cash laid out by Satoshi Nakamoto in the original whitepaper.
Bitcoin developers’ refusal to raise the block size was followed by a narrative shift in which Bitcoin was rebranded as “digital gold” — a store of value, and not something to be used as a transactional currency.
This shift was reasoned as necessary because increasing the block size to include more transactions would mean the blockchain would grow larger and demand more hard drive space from node operators over time.
Opponents of the digital gold vision argue that hard drive space is something growing cheaper by the day, and would not pose an obstacle to would-be miners or node operators. Indeed, since 2015 alone the average cost of hard drive space per gigabyte fell from $0.038, to the current price of $0.021 witnessed at the time of publication.
The 400GB Bitcoin blockchain could fit 25 times over onto a consumer hard drive that can presently be purchased for around $200.
And while analysts claim Bitcoin will eventually find price stability at some point in the future, that day has not yet arrived.
Recent price volatility is an obvious reminder of this, as is the ever-constant flow of large sums of BTC to centralized exchanges, as whales constantly look to capitalize on market fluctuations.
Krugman said the perceived value of Bitcoin rested on the illusion that it was a technological solution to the impending collapse of the fiat system, something he suggested was a libertarian folly.
“Its value rests on the perception that it’s a technologically sophisticated way to protect yourself from the inevitable collapse of fiat money, which is coming one of these days, or maybe one of these centuries,” Krugman said, adding, “Or, as I say, libertarian derp plus technobabble.”
Krugman signed off on a week of drama in the crypto space by extending a barbed olive branch to the Bitcoin crowd. Krugman suggested Bitcoin’s longevity was assured, but only because new members would constantly be recruited to its “cult.”
“But I’ve given up predicting imminent demise. There always seems to be a new crop of believers. Maybe just think of it as a cult that can survive indefinitely,” he said.
Billionaire Investor Mark Cuban To Talk Crypto On Blockchain & Booze Tonight
Billionaire investor Mark Cuban is set for a virtual sit down to discuss what he finds exciting in the crypto space, perhaps over a few beers. And it’s live on Cointelegraph’s Twitter feed.
Cuban is expected to talk about his fascination with decentralized finance and nonfungible tokens, and his views on the most imminent and compelling use cases for blockchain technology.
The billionaire investor recently joined a group of National Basketball Association franchise owners exploring the adoption of the novel tech in the NBA.
Register For The Event Free!
According to host Adam Levy of blockchain venture studio and fund Draper Goren Holm, the billionaire investor will also touch on his recent Dogecoin (DOGE) interest, as well as other projects on his investment radar.
Cuban recently adopted DOGE as a payment option for Dallas Mavericks merchandise. Earlier in March, the NBA franchise owner tweeted that Dogecoin’s price could reach the $1 mark on the back of sales of “Mavs merch.”
Cuban’s more positive statements about crypto in recent times appear at odds with his prior position where on one occasion he expressed his preference for bananas over Bitcoin (BTC).
These days, he is more likely to be found praising cryptocurrencies, including Bitcoin. Cuban recently disagreed with noted “gold bug” and BTC skeptic Peter Schiff, calling Bitcoin living technology while referring to gold as being dead.
Commenting on Cuban’s scheduled appearance on Blockchain & Booze, Adam Levy, the show’s host, stated:
“Having Mark Cuban on the show is one of our biggest highlights for the Boozer community. I’m honored to be sharing an hour with him live in front of thousands and to pick his brain on his outlook for the industry.”
Episode 50 featuring Cuban will air via livestream on the Cointelegraph Twitter account on Tuesday, March 9 at 5:00 p.m. Pacific Time (1:00 a.m. UTC, March 10 ).
The hour-long fireside chat will be followed by a 60-minute networking session for streamers and viewers.
The Blockchain & Booze show happens every Tuesday, and it’s free to register at Blockchainbooze.io.
New Bitcoin Price Highs Revive Old Misconceptions About BTC And Crypto
With crypto exceeding all monetary expectations in 2020, some mainstream analysts have reverted to long-forgotten arguments from 2017.
As anyone following the crypto industry will have noticed, yes, Bitcoin (BTC) did recently smash its previous all-time high of around $20,000. Now, many analysts anticipate the cryptocurrency to eventually rise to the mid-$30,000s or even higher within the next few years.
As things stand, BTC is trading at around $23,300, briefly testing the $24,000 mark on several occasions. However, despite all of these positive developments, many prominent individuals from the financial mainstream have spoken negatively about the crypto industry, using cliche adages — such as “crypto is for criminals” and “crypto is all hype, no substance,” etc. — to describe BTC and other prominent digital currencies.
For example, renowned economist and financial strategist David Rosenberg recently referred to Bitcoin as a “massive bubble,” propping up the argument by saying that the supply curve of Bitcoin is unknown even though some people claim to know otherwise.
Similarly, Mark Cuban, who is generally quite open-minded in regard to various futuristic technologies, also bashed Bitcoin, claiming that it is “more religion than solution.” However, he did concede that despite its shortcomings, it may be useful as a store of value.
And while crypto tech is far from perfect — admittedly being many years away from replacing legacy financial instruments such as fiat — the aforementioned opinions may seem to come across as the ramblings of annoyed traditionalists who fail to see the immense potential of the technology.
2020 Bull Run Is Different From 2017
As soon as Bitcoin broke the $20,000 mark, it was inevitable that analysts from across the board would seek to use the “this bull run is the same as 2017” argument to undermine the financial traction being gained by the industry as a whole.
In this regard, “CryptoYoda,” an independent cryptocurrency analyst, pointed out to Cointelegraph that one can see that the fearful perspective provided by the financial mainstream stems from a lack of understanding of the technology. As such, he believes that what is happening right now is a shift from debt-based fiat currency to trustless financial systems:
“What has changed? Everything. While the 2017 bull run was largely driven by early adopters and retail, this bull run is being dictated by institutional players entering the market. […] As of now, institutions buy a multiple of what is being mined per day. When one institution accumulates 500MM in BTC, it means that 500MM is no longer available for the other key players observing the market for entry.”
In a similar line of thinking, Jason Lau, chief operating officer of OKCoin, told Cointelegraph that it’s safe to say that the long-looming promise of mainstream players entering the crypto space has finally been fulfilled.
In his view, this ongoing bull run has been driven by traditional financial institutions buying Bitcoin price dips as an investment and treasury product: “They have a long term strategy for these assets. So with increased demand, HODLing, and fewer block rewards due to the recent halving, the price may have no limits.”
Additionally, another major difference between the ongoing cycle and the one witnessed before is that back in 2017, the industry was in the midst of a feverish initial coin offering craze, with the bubble duly bursting within just a few month’s time, resulting in the entire crypto economy crashing almost overnight.
According to Adam Neil, chief marketing officer of Bitrue — a digital-asset management platform — these days, people in crypto are much more pragmatic, adding: “Publicly-listed companies like MicroStrategy and PayPal have come on board, and the growth of the CME Bitcoin Futures market indicates increased demand for regulated exposure.”
Crypto Can’t, And Shouldn’t, Be Compared To Traditional Financial Mediums
It is no secret that despite its bullish outlook, a certain degree of uncertainty in regard to BTC’s value still exists, as was made clear in November when the price of the flagship cryptocurrency dipped by $3,000 within a span of just 24 hours. That being said, it is unfair to compare BTC, which is just over a decade old, to legacy systems that have been around for more than a hundred years.
So, it’s worth exploring the true meaning of the term “safe haven,” especially as the world struggles with COVID-19-induced financial destruction. CryptoYoda believes that while precious metals like gold and silver certainly are tangible stores of value, they are not very practical — i.e., they are difficult to store, transport, secure, etc. He added:
“I will always remain an advocate for precious metals as they are the ultimate stores of value and have been an accepted form of money for hundreds and thousands of years. It is difficult to store it all in Gold, and then it still needs to be protected and cannot be easily moved.”
Neil believes that while it may not be fair to compare Bitcoin to traditional stores of value, in recent times, the world’s leading cryptocurrency appears to be shouldering that expectation quite well.
In his view, the digital-gold narrative is incredibly strong within the community, with a lot of people truly believing in the technology and actively working to make Bitcoin more valuable, whether by running nodes, mining, writing and reviewing code, or HODLing it.
Additionally, it’s also important to recognize how far Bitcoin has come in relation to various legacy financial systems, with an increasing number of mainstream investors now looking to enter the domain.
Providing his insights on the matter, Yoni Assia, founder and CEO of eToro — a social trading and multiasset brokerage company — told Cointelegraph that crypto is no longer just the domain of computer programmers and fintech advocates, adding: “We expect this to continue into 2021 as fears of inflation continue to creep up globally.”
Crypto Is Not Perfect, And That’s Fine
While crypto stands to completely redefine the way in which the global financial ecosystem works, it still faces many pertinent issues that need to be ironed out. For example, over the first 10 months of 2020 alone, losses from cryptocurrency thefts, hacks and frauds amounted to a whopping $1.8 billion, according to blockchain forensics company CipherTrace.
The company even suggested that 2020 was on track to record the second-highest value in losses linked to crypto crimes, exceeding $4.5 billion.
Furthermore, due to regulatory uncertainty, crypto continues to be used by certain sections of society as a means of tax evasion.
For example, the United States Justice Department recently indicted John McAfee, an antivirus software creator and crypto proponent, accusing him of tax fraud worth millions of dollars linked to his crypto proceeds between 2014 to 2018. Furthermore, CryptoYoda believes that in its current state, the industry is far from perfect, adding:
“Scalability is a major issue. Similarly, state-level attacks pose another major risk, with such issues most likely rising as the industry grows from strength to strength. While the technology in itself is positioned well for such attacks, individuals are not. The greatest risk I see in this market is the forcing of KYC on every exchange and individual, which undermines the promise of cryptocurrency.”
That being said, fiat currencies are also used by criminals; however, in such scenarios, the “fiat is for criminals” argument is never drawn out. For example, according to a recent BBC report, HSBC allowed tech-savvy scamsters to transfer millions of dollars around the world even after it had learned of their ploy.
The leaked documents claim HSBC moved around $80 million through its U.S. business to its accounts in Hong Kong between 2013 and 2014. What’s even more surprising is that the endeavor kicked off right after the banking institution was fined a whopping $1.9 billion in the U.S. over money laundering charges.
Other reports have also suggested that banks such as JPMorgan Chase and Standard Chartered have too been implicated in moving some $2 trillion of “dirty money” between 1999 and 2017.
So, it seems that both the traditional and crypto worlds only manage to see the speck in their brother’s eye but not the log in their own.
Furthermore, since there are fewer well-known advocates for crypto in comparison with traditional finance, it’s of no surprise that the aspiring blockchain sector is losing out on the media spin war. As a result, many common misconceptions continue to seep into the consciousness of the masses, ultimately damaging the perception and delaying the adoption of the technologies.
Bitcoin’s Limited Supply Doesn’t Really Matter To One Markets Commentator
Dennis Gartman is still not convinced that Bitcoin won’t go to zero.
Bitcoin (BTC) has won over a number of mainstream financial gurus in 2020 against the backdrop of a difficult year for the United States economy. Some markets experts, such as Dennis Gartman, however, still remain skeptical of the digital asset.
Gold and Bitcoin are not really equivalent, according to Gartman’s Tuesday interview with Bloomberg. “Gold has been around for thousands of years, Bitcoin has been around for 20 years,” he said. Gartman put out a financial commentary series for 30 years, called The Gartman Letter.
Bitcoin has not been around for 20 years though. The asset’s pseudonymous creator, Satoshi Nakamoto published the written framework for Bitcoin in 2008, and the asset officially launched on the web in 2009.
“Bitcoin is the Millenials’ gold, I understand that, I get that,” Gartman said. “I will never understand Bitcoin as far as being able to buy it at $10,000, $15,000, $20,000 — I shall leave that for people who are wiser, smarter or more courageous than am I.”
As many have projected before him, Gartman believes Bitcoin’s price will eventually falter. “I fear that once, in the not-too-distant future, the monetary authorities, the various central banks around the world, are going to refuse to give up their monopoly on monetary policy and will walk in one day and Bitcoin has been rendered zero,” he said, adding:
“But can it go to $100,000 before then? John Maynard Keynes once said the market can remain illogical for longer than you or I can remain solvent, and right now seems to me to be utterly illogical.”
Gartman showed no hard feelings against Bitcoin market participants though, simply explaining that he prefers gold over the digital coin. He also mentioned Bitcoin’s limited supply and the arguments for the asset’s expected price rise as a result. “Now there’s what, 7,000 various cryptocurrencies out there,” he added, positing:
“There’s an infinite amount of finite amounts of currencies, so I think that the fun, the joy, the enthusiasm over Bitcoin and the cryptos will go the way of all flesh eventually.”
On the opposite side of Gartman’s sentiment, 2020 has hosted a growing trend of traditional financial players allocating capital to Bitcoin.
After Promoting Bitcoin Merch Discount, Mark Cuban Praises BTC Monetary Policy
The billionaire seems to have one foot in, one foot out when it comes to Bitcoin.
During a Christmas rally that has pushed the Bitcoin all time high mark ever higher, a pair of recent tweets indicate that a former critic of the digital currency is continuing to take steps towards a full-blown hodler conversion: billionaire investor and owner of the Dallas Mavericks Mark Cuban.
The Tweet came on December 23rd, when Cuban announced that fans buying Mavericks gear would receive a 25% discount when they used Bitcoin to make their purchase. Oddly enough, however, the report Cuban linked to instead said that purchasers who buy more than $150 worth of gear using Bitcoin would receive a $25 gift card, and did not mention a 25% discount:
— Mark Cuban (@mcuban) December 23, 2020
This gift card offer, as well as a wider Mavericks policy of accepting Bitcoin as payment for tickets, strikes some observers as odd given Cuban’s history of denigrating the asset. Earlier in 2020 he dusted off a zinger he first fired off in September of 2019: that he prefers bananas to Bitcoin as a commodity.
Many have described coming around to Bitcoin’s virtues as a store-of-value as a process and not an event, however, and Cuban seems to be taking the requisite steps.
In a Tweet just today, Cuban seemed to praise Bitcoin’s programmatic monetary policy, saying that publicly traded companies would be wise to restrict their share inflation:
Public companies should learn a lesson from BItcoin and commit to not issue new shares of stock. Ever. Their stock prices would immediately jump.
— Mark Cuban (@mcuban) December 27, 2020
It’s a positive comment that’s part of an ongoing, years long about-face that has landed Cuban on Cointelegraph’s list of Bitcoin critics who have withered in 2020.
Still, hodlers should be cautious about fully welcoming another member into their ranks. As he progresses in his journey towards hard money, Cuban has expressed disdain for what he believes to be “religious” zealotry among holders hoping for a doomsday scenario, and in yet another tweet this week, it’s a theme he seemed to riff on, pretending to be one of the faithful:
Blasphemous I say, just Blasphemous ! https://t.co/Jk47KqY2x6
— Mark Cuban (@mcuban) December 21, 2020
JPMorgan Predicts Bitcoin Price Could Rise Over $146,000 In Long Term
Investment banking giant JPMorgan has called a long-term bitcoin price target of over $146,000 based on the assumption that the cryptocurrency will grow in popularity as an alternative to gold, Bloomberg reports.
“A crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin over the long term,” strategists led by Nikolaos Panigirtzoglou wrote in a note on Monday. “Bitcoin’s [current] market capitalization of around $575 billion would have to rise by 4.6 times – for a theoretical bitcoin price of $146,000 – to match the total private sector investment in gold via exchange-traded funds or bars and coins.”
However, analysts argued that bitcoin’s price volatility needs to drop for institutions to make large allocations. The convergence of bitcoin and gold volatilities is a “multi-year process” and suggests that the $146,000-plus target is a long-term objective, JPMorgan noted.
Bitcoin rallied by 300% to $29,000 in 2020 and extended gains to a new record price of $34,420 in the first three days of the new year. The cryptocurrency has gained over 160% in the last three months alone, helped along by increased institutional participation.
While the crypto community expects the rally to continue, JPMorgan sees signs of “speculative mania” and believes further big gains towards the region of $50,000-$100,000 may be unsustainable in the near term.
Jamie Dimon’s Bitcoin Quotes
Dimon doesn’t want to be seen as the spokesperson for bitcoin critics. However, his comments have earned him a reputation as one of the most prominent bitcoin haters and doubters.
People have made money investing in bitcoin, but that doesn’t move JPMorgan Chase’s top executive. In fact, Dimon has warned that he would fire JPMorgan Chase traders immediately if he caught them trading bitcoin. According to Dimon, trading cryptocurrency is a stupid idea that goes against JPMorgan Chase’s rules.
Dimon called bitcoin a fraud in 2017. At the time, bitcoin’s price soared close to $20,000 from $2,000 in a space of about five months. The gains were short-lived and the cryptocurrency later crashed to about $3,000, which resulted in talks of a bitcoin bubble.
Some of Dimon’s Bitcoin Quotes Include:
- “If you’re stupid enough to buy it, you’ll pay the price for it one day,” Dimon said at the height of bitcoin’s surge in 2017.
- “It’s [bitcoin] worse than tulip bulbs. It won’t end well. Someone is going to get killed.”
- “It’s [bitcoin] just not a real thing, eventually it will be closed.” “I’m not saying go short bitcoin and sell $100,000 of bitcoin before it goes down,” Dimon stated. He went on to say that “this is not advice of what to do. My daughter bought bitcoin, it went up and now she thinks she’s a genius.”
JPMorgan To Let Clients Invest In Bitcoin Fund For First Time
The JPMorgan bitcoin fund could roll out as soon as this summer, sources tell CoinDesk. NYDIG will be the fund’s custody provider.
JPMorgan Chase is preparing to offer an actively managed bitcoin (BTC, +8.47%) fund to certain clients, becoming the latest, largest and – if its CEO’s well-documented distaste for bitcoin is any indication – unlikeliest U.S. mega-bank to embrace crypto as an asset class.
The JPMorgan bitcoin fund could roll out as soon as this summer, two sources familiar with the matter told CoinDesk. Institutional bitcoin shop NYDIG will serve as JPMorgan’s custody provider, a third source said.
JPMorgan’s bitcoin fund will be actively managed, multiple sources told CoinDesk. That’s a notable break from the passive fare offered by crypto industry stalwarts like Pantera Capital and Galaxy Digital, which let well-heeled clients buy and hold bitcoin through funds without ever touching it themselves. Galaxy and NYDIG are now offering bitcoin funds to Morgan Stanley clients.
The JPMorgan fund will be for private wealth clients, a source familiar with the situation told CoinDesk.
The move by JPMorgan marks a sharp turn for the $3 trillion bank.
JPMorgan CEO Jamie Dimon called bitcoin a dangerous fraud in 2017, threatening then to “fire in a second” any trader who touched the stuff. “If you’re stupid enough to buy it, you’ll pay the price for it one day,” he said at the time.
While he quickly walked back the “fraud” label and has more recently toned down his rhetoric, Dimon, who has repeatedly argued that government regulation of cryptocurrencies is inevitable, maintained late last year that bitcoin is “not my cup of tea.”
Despite its CEO’s personal disdain for the crypto, top deputies within its Corporate and Investment Banking division acknowledged in February that client demand might force the institution to change.
JPMorgan’s hulking investment, commercial banking and wealth management divisions have gradually evolved in their treatment of crypto and blockchain, even if the client-facing bitcoin fund is new. The bank’s research analysts regularly issue market insight on bitcoin’s price and prospects in reports available to clients.
The firm’s Onyx division seeks to speed up interbank payments via blockchain technology and JPM coin, for example. After five years of quiet development, Onyx is mounting a global hiring campaign for blockchain engineers.
On the Investment Banking side, JPMorgan issued its first crypto-adjacent investment product in March, a structured note tied to the performance of bitcoin proxy stocks such as MicroStrategy and Riot Blockchain.
JPMorgan’s new fund product, however, will be its first directly dependent on bitcoin’s performance.
Bank representatives did not respond to CoinDesk’s questions by press time.
Behind The Bitcoin Bubble
Manipulative actors have been known to take advantage of the madness of crowds.
To figure out if you’re in a bubble, you need to find the source of the hot air. Obvious for GameStop, but for bitcoin, not so much.
In July 2018, we wrote about the cryptocurrency company Tether, which issues tokens called tethers that trade under the symbol USDT and should be valued at $1—making the currency a “stablecoin.” Tether’s creators might have manipulated bitcoin, a University of Texas paper suggests, by issuing tokens willy-nilly unbacked by real dollars and then buying bitcoin to jack up its price. (The company claims the research is flawed.)
At the time, Tether’s total value was some $2.7 billion, and its website claimed: “Every tether is always backed 1-to-1 by traditional currency held in our reserves.” So somewhere there should have been $2.7 billion in real money—that’s how a stablecoin is supposed to work.
In November 2018, New York state Attorney General Letitia James invoked the Martin Act to begin an investigation into iFinex, which owns Tether and the Bitfinex cryptocurrency exchange, “in connection with ongoing activities that may have defrauded New York investors.”
The company has disputed the attorney general’s claims, denied it misled customers, and said it will fight any action. An appellate court last year rejected its challenge to the probe.
Bitcoin peaked at the end of 2017 at $19,000 and over the next year collapsed to $3,200. Well—they’re baaack! On Friday Elon Musk was the latest to pump Bitcoin, which briefly reached almost $38,000. And there are now some $26.4 billion of USDT tokens, $18 billion of which were created since March 2020. Why the increase? No one has a good explanation.
All that glitters is not gold. In 2019 Tether subtly updated its claim to say reserves “may include other assets and receivables from loans made by Tether to third parties.” Tether has even admitted it only has 74% of the cash or cash equivalents to back its stablecoin. Hmmm. Basically unbacked.
In October 2019, a separate lawsuit was filed against Bitfinex claiming the exchange’s alleged market manipulation “likely surpasses $1.4 trillion,” which Bitfinex denies.
Yes, that’s trillion with a T. Bahamas-based Deltec Bank & Trust, where Tether has an account, recently claimed “every tether is backed by a reserve and their reserve is more than what is in circulation.” OK, but it turns out “reserves” may include an $850 million loan to Bitfinex. Is that the hot air? Oh, and reserves may include bitcoin too. Audit, anyone?
Pay no mind: “Momo” momentum investors dived in anyway. Bitcoin ran from $7,000 in January 2020 to almost $42,000 this Jan. 8. But the bitcoin bulls and bears are brawling.
On Medium a few weeks ago, a poster named Crypto Anonymous (for what it’s worth, know your customer) did some digging and found that as much as two-thirds of bitcoin buys on any given day were purchased with tether, though crypto bulls insist that Chinese crypto investors use tether as a way to buy bitcoin.
Try verifying that! The chart of bitcoin vs. tether issuance sure looks correlated, but a study published at the Center for Economic and Policy Research found no correlation. And I should note that wallet provider Coinbase, the largest holder of Bitcoin, says it “does not support USDT.” Do they know something?
Meanwhile, more than two years later, the New York attorney general’s office may get the documents it needs. I hope that includes an audit of Tether looking for the now $24.5 billion in cash, or even $19 billion if it’s 74% backed.
I doubt all that cash exists. The attorney general claimed in a press release that some fishy money, maybe $850 million now part of Tether’s reserves, was taken from Tether to cover losses at Bitfinex. Yikes.
I contacted the attorney general’s office asking for the status of the investigation and what information it has received. I was pointed to the original filing for the scope of the investigation.
It includes an accounting of all of Tether’s transactions. On Jan. 19, a letter from iFinex’s counsel said it had “largely completed the document production” and would “contact the Court in approximately 30 days” with a status update. So we’ll know something soon.
Meanwhile, lo and behold, around the same time as that letter, Tether temporarily stopped creating any more currency. That might explain bitcoin’s quick mid-January price drop from $42,000 to under $30,000. If fraud is uncovered, look out below.
Normally I wouldn’t care. Bitcoin is nothing, it’s vapor, a concept of an idea. Transactions using bitcoin are few and far between. It’s not a store of value—anything that drops 30% in a week can’t play that role.
But we get Bloomberg Wealth stories saying: “Newbie Bitcoin investors tell us what inspired them to buy at record prices.” A lot of folks who can’t afford it may get hurt badly. Robinhood curbed some crypto purchases on Friday.
So all crypto eyes are on mid-February. The power of the subpoena is strong. I have no insight into what New York’s attorney general will find. She might close the investigation and go on her merry way because there’s no crime, or uncover a fraud that could make Bernie Madoff look like he was stealing from a lemonade stand. We know what happens to bubbles when the hot air runs out.
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Coin Metrics Co-Founder Takes Aim At WSJ’s Tether FUD
Reputable data analyst fires back at “wild theories” about Tether reported by the Wall Street Journal.
The co-founder of crypto data and insights firm Coin Metrics has fired back at yet another article in mainstream media claiming that the “Bitcoin bubble” has been driven by Tether.
Nic Carter, a former Fidelity crypto asset analyst and Castle Island Ventures partner, slammed the Wall Street Journal article titled “Behind the Bitcoin Bubble” by Andy Kessler, alleging that it verged on “journalistic malpractice”.
“Normally, if you are a columnist writing in one of the most respected financial publications, you might try and evaluate the data behind that claim, instead of just uncritically accepting it. But Mr. Kessler did no such thing. He just blindly repeated a fanciful claim from an anonymous blogger in order to imply that Bitcoin’s price was somehow dependent on Tether.”
The award-winning WSJ writer based some of his fairly extensive criticism on the work of a blogger called “CryptoAnon” in a viral post called “The Bit Short: Inside Crypto’s Doomsday Machine”. Kessler wrote the blogger had “found that as much as two-thirds of Bitcoin buys on any given day were purchased with Tether” based on CoinLib data.
Raising questions over Tether and its lack of audits and the idea USDT was being employed to buy Bitcoin to “jack up its price,” Kessler added;
“Normally I wouldn’t care. Bitcoin is nothing, it’s vapor, a concept of an idea. Transactions using Bitcoin are few and far between. It’s not a store of value—anything that drops 30% in a week can’t play that role.”
Kessler said he must also note that “wallet provider Coinbase, the largest holder of Bitcoin, says it ‘does not support USDT.’ Do they know something? (Coinbase offers its own stablecoin USDC, in partnership with Circle.)
Carter, who is now board chair at Coin Metrics, wrote that assessing trade between USDT and Bitcoin using data called CoinLib was “indefensible” as it included tens of billions of wash trading data from exchanges that reputable data sources ignore.
He said any serious trader knows that “many of the exchanges composing the CoinLib sample are not credible, and that the resultant data was thus completely unreliable.”
“As I will demonstrate, this data is not sufficient to make the case that Bitcoin liquidity is dominated by Tether, and relying on it is liable to mislead. Unfortunately, the mainstream financial press is now amplifying these erroneous claims.”
Carter stated that CoinLib is taking the data outputs from marginal and often non-fiat connected Tether based exchanges as face value, and “unsophisticated analysts like CryptoAnon” are using it to disseminate FUD about Bitcoin’s liquidity.
He argued that highly regulated exchanges and institutional fund providers do not rely on or even support Tether in some cases and they all facilitate an on-ramp to Bitcoin and support the price.
“Other entities like Cash App, Paxos, Paypal, BlockFi, Robinhood, Bitwise, and Grayscale all facilitate various forms of exposure to Bitcoin and are connected to the commercial bank system and in some cases publicly-traded companies. No Tether present.”
Carter concludes that Kessler needs more research and called for a retraction and a correction by the WSJ:
“Wild theories relying on data that everyone in the crypto industry knows to be erroneous do no one any good.”
Jordan Belfort “Wolf of Wall Street” Admits, “I Was Wrong About Bitcoin”!
Jordan Belfort Explains Why GAMESTOP MONEY will flow into Cryptocurrency!
Former Risk Analyst, Nassim Nicholas Taleb Explains Why He’s Selling His Bitcoin
According to his logic, Bitcoin has been a failure for 11 years.
Bitcoin has gained significant media attention in recent days, in line with its price rise to nearly $50,000, the institutional implications of Tesla’s recent $1.5B purchase. Nassim Nicholas Taleb, who previously worked as a risk analyst and options trader, views Bitcoin (BTC) less than optimistically, however.
“I’ve been getting rid of my BTC,” Taleb said in a tweet on Friday, as reported by BNN Bloomberg. “Why? A currency is never supposed to be more volatile than what you buy & sell with it,” he explained, also noting:
“You can’t price goods in BTC. In that respect, it’s a failure (at least for now). It was taken over by Covid denying sociopaths w/the sophistication of amoebas.”
Taleb’s logic keys in on Bitcoin as a currency, not a store of value — though the latter has redefined the digital asset’s role in some ways in recent years, at least according to multiple crypto industry players.
Some folks, such as Bitcoin Cash (BCH) advocate Roger Ver, have argued that BTC was meant to serve as a payment method. Ver often posits that Bitcoin’s current framework does not allow for such a transactional role, echoing some of Taleb’s concerns.
Gold advocate and finance commentator Peter Schiff also often speaks out against Bitcoin, although a growing number of mainstream companies obviously think differently, seeing value in the digital asset.
One of Bitcoin’s biggest recent proponents, MicroStrategy CEO Michael Saylor, views Bitcoin as a method of preserving value while other assets and currencies become worth less.
Nassim Nicholas Taleb, author of “The Black Swan,” says he has been getting rid of his Bitcoin.
A currency is never supposed to be more volatile than what you buy and sell with it, the former options trader said, adding that you can’t price goods in the cryptocurrency. “In that respect, it’s a failure (at least for now).”
Taleb also said in a separate tweet Bitcoin has failed as a hedge against central bank policies.
Bitcoin was up 1.5% since 5 p.m. yesterday to $47,657 at 12 p.m. in New York, according to a composite of prices compiled by Bloomberg. The coin has gained 64% so far this year.
Sheila Bair Says Don’t Buy Bitcoin, It’s At ‘Nosebleed Levels’
Sheila Bair, who was a key banking regulator in the heat of the 2008 financial crisis, says investors should avoid buying Bitcoin.
“Stay away from it,” she said late Wednesday in a Bloomberg Radio interview. “It’s volatile. It’s at nosebleed levels now. We don’t know how sustainable that is.”
“If you’re a very wealthy person with some money to risk, fine, but no — I don’t have a lot of confidence in it,” she added.
Bair’s comments came before Mastercard Inc. and Bank of New York Mellon Corp. moved to make it easier for customers to use cryptocurrencies, driving the price of Bitcoin to a record high. The credit card company is honing in on so-called stablecoins, which peg their value to that of another asset, like the U.S. dollar.
Bair is on the board of Paxos, a firm that focuses on such assets and believes they are a better way to invest in digital assets. She is also on the board of blockchain-technology company Spring Labs.
“The problem with Bitcoin is it is so volatile. So its original promise as a method of payment really, its volatility gets in the way of its usefulness,” she said. “I’ve always been more interested in the technology that underpins Bitcoin.”
Bair is the former chair of the Federal Deposit Insurance Corp. and is currently the chair of the board of Fannie Mae.
From ‘Not Money’ To ‘Staggeringly Great’: What US Presidents Have Said About Crypto And Blockchain
“I don’t have Bitcoin, and I’ll never ask you to send me any,” said Joe Biden.
In recognition of Presidents’ Day, Cointelegraph is taking a look at the remarks of current and former leaders of the United States regarding crypto and blockchain.
One of the earliest presidential adopters, Bill Clinton reportedly received his first Bitcoin (BTC) in 2016 — more than fifteen years after his two terms in office. Though the Democratic U.S. President accepted the crypto asset gift from venture capitalist Matthew Roszak, seemingly with a smile on his face, he has been largely silent on the ecosystem. However, Clinton gave a keynote speech at Ripple’s Swell conference in 2018, calling blockchain a technology for which the “permutations and possibilities are staggeringly great.”
— Matthew Roszak (@MatthewRoszak) April 29, 2016
When the Bitcoin genesis block was generated on Jan. 3, 2009, George W. Bush had only a little more than two weeks left in office after serving two terms. Sworn in later that month, Barack Obama was the first U.S. President forced to deal with the regulatory implications of cryptocurrency and blockchain.
The 44th President arguably enacted policies to deal with the 2008 financial crisis that may have led to greater interest and adoption of cryptocurrencies, as many seemingly distrusted the role the government was playing in the financial system. However, Obama himself has made few, if any, public statements on the technology.
Last year, hackers took over a number of high-profile Twitter accounts including those of former President Obama and then presidential candidate Joe Biden. The latter clarified in response that the entirety of his Bitcoin holdings were zero.
I don’t have Bitcoin, and I’ll never ask you to send me any.
But if you want to chip in to help make Donald Trump a one-term President, you can do that here: https://t.co/8XtBjuU5fX
— Joe Biden (@JoeBiden) July 16, 2020
However, former host of The Apprentice Donald Trump has arguably been one of the most vocal public figures on crypto and blockchain. The price of Bitcoin rose to a then all-time high close to $20,000 less than one year into his first and only term. The subsequent explosion in initial coin offerings led to a regulatory crackdown by the Securities and Exchanges Commission under Trump.
Two years ago, Trump voiced his opposition to the technology in a series of tweets saying he was “not a fan of Bitcoin and other cryptocurrencies,” referring to them as “not money,” “highly volatile,” and “based on thin air.” He also attacked Facebook’s Libra token as having “little standing or dependability.”
His seeming disdain for digital assets was not limited to social media rants. Trump reportedly told his Treasury Secretary Steve Mnuchin to “go after Bitcoin” in response to trade sanctions and tariffs against China. The conversation reportedly took place in May 2018.
As President Biden has been in office for less than a month, it is unclear whether we can expect additional public statements from him on crypto. Members of his cabinet hold diverse views about the ecosystem. Treasury Secretary Janet Yellen said during her confirmation hearing that cryptocurrencies are used “mainly for illicit financing.
However, SEC chairman Gary Gensler is considered by many to be a crypto-friendly face for the administration given his understanding of the space — he has taught courses on digital assets and blockchain at MIT and said that the crypto market needs regulation to grow.
What would the founding founders have said about digital currencies? Though the technology may have been impossible to imagine at the time, the dangers of the centralization of banks did not escape Thomas Jefferson. The 3rd U.S. President wrote:
“Banking establishments are more dangerous than standing armies and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
People Don’t Want A ‘Non-Uniform Currency’ Like Bitcoin, Says James Bullard, Fed President
“It’s going to be a dollar economy as far as the eye can see,” said James Bullard.
James Bullard, president of the Federal Reserve Bank of St. Louis, seemingly doesn’t understand why many are looking to cryptocurrency as a medium of exchange instead of a uniform currency like the U.S. dollar.
In an interview with CNBC’s Squawk Box on Tuesday, Bullard said the issue for making payments isn’t currencies that can be traded electronically but rather privately issued ones, as is the case for many cryptocurrencies. He referenced a time in the United States before the Civil War when there was confusion and a dislike for trading the “equivalent of Bank of America dollars and JPMorgan dollars and Wells Fargo dollars.”
“I think the same thing would occur with Bitcoin here,” said Bullard. “You don’t want to go to a non-uniform currency where you’re walking into Starbucks and maybe you’ll pay with Ethereum, maybe you’ll pay with Ripple, maybe you’ll pay with Bitcoin, maybe you’ll pay with a dollar — that isn’t how we do this.”
— Squawk Box (@SquawkCNBC) February 16, 2021
The Fed president referenced other privately issued currencies globally that are required to abide by the same restrictions as any currency issued by a central authority. He said private currencies aren’t able to maintain a stable value against goods and other currencies, nor is their future supply “at all clear.”
Bullard’s comments came as Bitcoin (BTC) hit a new all-time high price of more than $50,000 Tuesday morning. Though the Fed president said characterizing the crypto asset as a rival to gold “might be a good way to think about” Bitcoin, he largely reserved his bullish remarks for the U.S. dollar.
“It’s going to be a dollar economy as far as the eye can see and a dollar global economy really as far as the eye can see. Whether the gold price goes up or down or the Bitcoin price goes up or down doesn’t really affect that.”
Reminded of Dutch Tulip Craze, ECB’s Makhlouf Won’t Buy Bitcoin
European Central Bank governing council member Gabriel Makhlouf said he wouldn’t buy Bitcoin, comparing investment in the world’s largest cryptocurrency to the 17th century Netherlands tulip craze — which ended in collapse.
Bitcoin investors need to be prepared to “lose all their money,” Makhlouf said, repeating a warning from last month, though added he’s not advising people whether or not to invest in the digital currency.
“Personally, I wouldn’t put my money into it, but clearly, some people think it’s a good bet,” Makhlouf, who is also governor of Ireland’s central bank, said on Tuesday at a webinar in Dublin. He said while some view Bitcoin an investment, “three hundred years ago, people put money into tulips because they thought it was an investment.”
Bitcoin Jumps to $50,000 as Record-Breaking Rally Accelerates
The token blew through another milestone, surging past $50,000 for the first time on Tuesday, and is up more than 70% this year, as the cryptocurrency continues to captivate investors worldwide.
Bitcoin’s ascent has been buoyed by high-profile endorsements, including a $1.5 billion purchase disclosed by Tesla Inc. earlier this month. Yet a debate continues about the token’s intrinsic value amid warnings that cryptocurrencies remain highly speculative.
Motley Fool Adding $5M In Bitcoin To Its ‘10X Portfolio’ — Has A $500K Price Target
“We plan to hold this Bitcoin investment for many years and we’ll wait for all of our members in our new 10X service to be able to buy before we do.”
Financial and investment advisory giant The Motley Fool has announced it will invest $5 million into Bitcoin (BTC) with the expectation that it will rise to $500,000.
Announced earlier today via a blog and Twitter post, the firm stated it won’t be “buying overpriced ETFs” but will be “buying Bitcoin directly.” Currently ranked fifth globally in the investing category, according to SimilarWeb, and with 87 million website visits per month, The Motley Fool outlined three core reasons behind the purchase: Bitcoin is a better store of value than gold, it’s an effective hedge against inflation and it has the potential to become a transactional asset.
1. We believe it will store value more effectively than gold over the long term.
2. We believe it may become a medium for transactions, as/if pricing stabilizes in the decade ahead.
3. We believe it can act as a productive hedge against inflation.
— The Motley Fool (@themotleyfool) February 17, 2021
The firm will be investing in Bitcoin through its 10X real-money portfolio as one of 40 assets that it predicts will provide a 1,000% return over the next 15 years. The firm has recommended the digital asset as a core holding to all its 10X members and has provided time for them to purchase BTC before The Motley Fool initiates its own purchase.
Due to the long-term commitment, the announcement explains that volatility is of little concern.
“While Bitcoin may very well continue to be volatile in the short term, we think it has 10x potential from today’s levels over the long term as part of a diversified portfolio. We plan to hold this Bitcoin investment for many years.”
Should the company’s prediction prove true, it will see Bitcoin passing $500,000 within the next 15 years. The Motley Fool says it has a solid track record with its investments.
The Motley Fool has so far named 10 of the 40 investment picks for the 10X portfolio, with the others being cloud computing company Appian Corporation, Swiss biotech firm CRISPR Therapeutics, cybersecurity firm CrowdStrike, e-commerce platform Etsy, genetic testing platform Fulgent, insurer Lemondate, social media platform Pinterest, mobile gaming platform Skillz and video communication firm Zoom. It is worth noting that many of these stocks have already been recommended in the firm’s other, more basic investment services.
The advisory firm has been aware of cryptocurrencies for years now, with a 2017 analysis suggesting that Bitcoin’s biggest competitor was not Ethereum but Litecoin.
Fun Fact: The second-most visited site users go to from The Motley Fool website is that of the Internal Revenue Service.
Motley Fool: 3 Big Flaws In The Bitcoin Investment Thesis
Here’s why this Fool won’t invest his own money in bitcoin, or any other cryptocurrencies for that matter.
Bitcoin and other cryptocurrencies have risen dramatically over the past year or so, and many investors are wondering if they should put some of their money into these digital assets.
Jason Moser: Well, Matt, speaking of fintech and banking of the future and all that jazz, we’ve seen over the past 24 hours, we don’t get into Bitcoin very often on this show. It’s not really what we cover here, but by the same token, we’ve seen Bitcoin pull back considerably here over the last 24 hours. I think it’s down somewhere in the neighborhood of about 20% here. You have some opinions on the matter. Why don’t you elaborate a little bit for us.
Matt Frankel: Now you’re going to make me be the bad guy again.
Moser: Well, I mean, I’ve got thoughts too, but I’m going to go ahead and let you start. [laughs]
Frankel: Well, for one, well, Bitcoin is still several times more than it was at this time last year so it’s taking one of the greatest falls. Bitcoin hit over $40,000 a coin last week, and has since pulled back a little bit. Over the past 24 hours alone, it’s down about 18%. Right around $32,800, right before we started recording this. Regardless of your opinions of Bitcoin, this volatility first makes me tell you to be careful. It’s a volatile asset. There are three arguments that I often hear in favor of Bitcoin. I know I personally don’t own any Bitcoin. I’ve mined Bitcoin. I actually mined about 12 coins in total back in 2012-2013 time frame.
Frankel: I wish I still had them. [laughs] Maybe that’s a little bitterness coming through.
Frankel: I understand the concept. I understand how it works. I understand the utility of it. There’s three main arguments that I always hear when people tell me I should own Bitcoin. One is that it’s scarce. It has a limited amount, and you can’t make anymore. My colleague, Sean Williams, has an article on Fool.com right now that points out, it would just take a majority of the Bitcoin community to agree to raise that. You could make more Bitcoin. I mean a majority consensus is why we have things like Bitcoin Cash, the offshoot cryptocurrency. Not only that, I checked right before we came on here, there are 4,308 different cryptocurrencies that are officially recognized right now. [laughs] Of those, $270 billion of cryptocurrency value is not Bitcoin. If Bitcoin is getting too expensive and still valuable, people can just use a different one.
Frankel: There’s a reason that there’s over $100 billion in the second largest cryptocurrency. I mean, the scarcity argument, I don’t totally buy. No. 2 of the argument that it’s a store of value, like gold. For one, forget about the scarcity thing where you can’t make more gold, but potentially there could be more Bitcoin made. Forget about that. I don’t want a store of value that can fluctuate by 20% in a day. That’s not a stored value.
Moser: Yeah, I agree. I mean, I’m not interested in that.[laughs]
Frankel: My savings account is a stored value because it’s value doesn’t fluctuate. I mean, you could say that inflation over time it will fluctuate but not by 20% in a day.
Frankel: This is why people, I think it was Venezuela that had a hyperinflation if I’m not mistaken.
Moser: Yeah. I believe you’re right.
Frankel: That’s why people were storing value in that currency because it was very volatile and unpredictable at that point.
Moser: Makes sense.
Frankel: The stored value I think I don’t really buy it at the moment. It’s a volatile day when the U.S. dollar moves by 1% in either direction against say, the euro.
Frankel: If Bitcoin got to that level of stability, I might buy the stored value argument a little bit more. But for the time being, it’s not a stored value. Argument 3 that I get and this is the one that’s going to be people really mad, is that there is no real use case for it. Okay, so let me give you one statistic. You can spend Bitcoin at about 2,300 merchants right now. 2,300 different retailers. That sounds impressive, right?
Moser: I guess. But out of a total number of what?
Frankel: If you just look at businesses that have at least one employee, there are 7 million small businesses in America.
Moser: Yeah, I was thinking that’s where we are going.
Frankel: That’s not a lot of penetration into the market.
Frankel: Bitcoin’s been around for a decade now. It’s been pretty well known. Everyone has at least know the term Bitcoin since about 2014-2015. It hasn’t proven as a useful currency over the U.S. dollar. Especially with all these fintech innovations that we’re talking about. With contactless payments, I can pay by just tapping my phone on something. I don’t need actual U.S. dollars to pay in U.S. dollars anymore. It’s become easy to transact in foreign currencies.
Moser: Yeah, absolutely.
Frankel: Which one of the biggest use case for Bitcoin as a currency is that it could be a worldwide universal currency. Now it’s easier than ever to switch from one currency to another. I don’t buy the use case for Bitcoin. I don’t see widespread adoption happening. I mean, you could make the argument that PayPal (NASDAQ:PYPL) and Square (NYSE:SQ) are onboard with Bitcoin and PayPal has said that it wants to make Bitcoin usable at its merchants. But I still don’t see the benefit to converting my U.S. dollars to Bitcoin to be able to use them on PayPal when I can just take my U.S. dollars and use them on PayPal. I don’t see the use case that’s going to appeal to Main Street. I get the early adopters who loved the technology and things like that. I get why they see a big use case at it, I really do. But I don’t see it translating to widespread mainstream adoption anytime in the next decade or more.
Moser: Just a reminder for all of our Bitcoin bull listeners, you can reach Matt on Twitter @TMFMathGuy. That’s @TMF [laughs].
Frankel: I thought you were about to give out my address or something.
Moser: I was just kidding. No, I won’t do that. Listen, just like I said, we don’t cover a lot of Bitcoin on this show because it stands on its own. It probably deserves its own hour. I think you make a lot of good points there and I’m sure there are folks out there who would take the other side of the coin, so to speak. I’m with you. I’m not saying there is not a use case. I’m not saying it’s not special. Maybe it is. You know what? I don’t care. That’s what it boils down to, is I just don’t care. My time is better spent doing something else. Focusing on what I do.
Moser: I know what I don’t know. I just don’t know enough about Bitcoin to really even care. I just leave it at that.
Frankel: Like I said, I’d make all those points with all due respect to the Bitcoin fans, people who love the technology, I get it. I’ve mined Bitcoin, I’ve used Bitcoin, I lived off Bitcoin for a day just to see if it was possible. [laughs] I get it. But I just don’t see the mainstream case for it at this point.
Frankel: I say it with all due respect.
Jason Moser owns shares of PayPal Holdings and Square and has no position in any cryptocurrencies mentioned. Matthew Frankel, CFP owns shares of Square and has the following options: short September 2022 $155 calls on Square. Matthew Frankel, CFP has no position in any cryptocurrencies mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and Square and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has no position in any cryptocurrencies mentioned. The Motley Fool has a disclosure policy.
Microsoft Has No Plans To Make Tesla-Like Move Into Bitcoin, Says President
Microsoft president Brad Smith did not exclude the possibility of the company putting Bitcoin on its balance sheet one day.
Microsoft, the second-largest company in the United States, does not apparently have any short-term plans to put Bitcoin (BTC) on its balance sheet, according to the firm’s president Brad Smith.
In a Feb. 16 interview with CNN’s Julia Chatterley, Smith still hinted that Microsoft could still change its mind about a Bitcoin investment.
When asked whether Microsoft is discussing any cryptocurrency diversification plans following Tesla’s $1.5 billion investment in Bitcoin, the Microsoft president said that he is not aware of such discussions:
“I haven’t heard any new conversation about Bitcoin. But let me just say, if we change our investment policy on Bitcoin, Julia, you will be the first or at least the second to know.”
Bitcoin’s market capitalization is inching higher to overtake some of the largest American companies. As previously reported, Bitcoin market cap surpassed Tesla’s at around $808 billion shortly after the company announced its massive Bitcoin investment.
Following Bitcoin’s historical move to hit above $51,000 on Feb. 17, 2021, Bitcoin’s market capitalization stands at $948 billion at the time of writing. Bitcoin would need to double its market cap to reach Microsoft’s, which amounts to $1.8 billion at publishing time.
On Feb. 12, JPMorgan Chase co-president Daniel Pinto claimed that the company will eventually have to get involved in Bitcoin due to surging demand. Previously, JPMorgan strategists argued that Tesla’s BTC purchase will not necessarily trigger a ton of similar investments due to Bitcoin’s high volatility.
Shark Tank’s Kevin O’Leary Reverses Stance On Bitcoin, Says Crypto Is Here To Stay, Invests 3% of His Portfolio
Shark Tank star Kevin O’Leary, aka Mr. Wonderful, has begun investing in bitcoin. Having previously called the cryptocurrency “garbage,” he has now changed his mind and believes that cryptocurrencies are here to stay. He is also getting used to the volatility of bitcoin and believes that institutional investors are willing to hold through price fluctuations.
Kevin O’Leary Now A Bitcoin Believer
Canadian investor and television personality Kevin O’Leary has changed his mind about bitcoin. He previously called the cryptocurrency “garbage” and a “giant nothing burger,” but now he has invested in bitcoin and thinks that it is no longer a fad.
“I actually think that digital currencies are here to stay,” he said in an interview with CNBC last week. “Most people that are willing to hold them, including institutions over the last 90 days, are willing to deal with the volatility.” O’Leary elaborated:
I am fascinated. I’m investing. I’m holding a 3% weighting in it between ethereum and bitcoin. The volatility sickens me but I’m getting used to it.
“And, finally, I’m starting to think about how do I invest in the infrastructure of mining bitcoin,” Mr. Wonderful added.
Commenting on bitcoin’s volatility, O’Leary shared: “Given the volatility of cryptocurrencies, the main decision you have to make after you decide to participate in the first place is what % of your portfolio do you allocate.
For me, 5% is the maximum.”
Morgan Creek Digital partner Anthony Pompliano, who had been trying to convince O’Leary to invest in BTC for years, responded to the Shark Tank star’s 5% allocation statement. “You forbid me to have 50% and you called it all ‘garbage,’ but now you think 5% is acceptable. Eventually, you will be 50% yourself.”
O’leary Replied, “Correct, I Change When Facts Change.” He Emphasized:
Canadian, Swiss and many other regulators have done a 180% on BTC. This is a game changer for many investors including me.
O’Leary had always been worried about regulators coming down hard on bitcoin. In December, he warned that “Grown men are going to weep when that happens. You will never see a loss of capital like that ever in your life. It will be brutal.”
Nonetheless, he said that if a bitcoin ETF is approved, he would be willing to put 5% of his portfolio in it. Recently, Canada’s securities regulator approved two bitcoin ETFs.
Investing In Cryptocurrencies Is ‘Not Prudent,’ Says New York Attorney General Letitia James
New York Attorney General Letitia James issued an alert to cryptocurrency investors and a strongly worded warning to industry participants.
Warning of the “extreme risks” of cryptocurrencies, New York State Attorney General Letitia James published a statement Monday saying investing in digital assets is “not prudent.”
James’ tweet comes after her office released an “alert to investors” of the risks involved in cryptocurrency markets. The memo includes risks such as “underlying value is highly subjective and unpredictable,” “increased risk of market manipulation,” and potential difficulties in cashing out of investments.
The warning to investors comes amid strong interest from retail investors who are contributing significantly to bitcoin‘s ongoing rally and are matched with increasing demand from institutional and corporate buyers, per CoinDesk previous reporting.
The Attorney General had a message for industry participants, too. After suing investment application Coinseed and settling an inquiry with Tether and Bitfinex, James said Monday, “We’re sending a clear message to the entire industry that you either play by the rules or we will shut you down.”
A spokesperson did not immediately return a request for comment.
Former Bitcoin Opponent Says Crypto Is An Effective Hedge Against Currency Debasement
George Ball, who serves as Chairman of Sanders Morris Harris, believes cryptocurrencies like Bitcoin are an “attractive” part of a well-balanced portfolio.
Financial industry veteran George Ball believes investors would be prudent to allocate a “small part” of their portfolio to cryptocurrencies — marking a major departure from his previous stance towards digital assets.
In an interview with Yahoo Finance, Ball described cryptocurrencies like Bitcoin (BTC) as an “attractive” option for investors looking to hedge against currency debasement. His comments came as Congressional lawmakers mulled a $1.9 trillion relief bill that would put provide up to $1,400 in direct stimulus payments to Americans impacted by Covid-19.
“I’ve never said this before, and I’ve always been a blockchain, cryptocurrency and Bitcoin opponent. But if you look now, the government cannot stimulate markets forever, the liquidity flood will end,” Ball said.
“With the cryptocurrencies, I think there is a fundamental hydra-headed shift that makes them attractive as a part, a small part, of almost any portfolio.”
If higher inflation leads to currency debasement over the long term, Ball said, “then the cryptocurrencies have a great deal of allure.”
Ball, who served as Chairman of Prudential Financial between 1982 and 1992, began to change his tune on Bitcoin in August 2020 when he told investors that now was the time to seek exposure to the digital asset. At the time, one Bitcoin was worth roughly $12,000. It’s presently valued at just over $48,000.
Wall Street veterans like Ball are warming to cryptocurrencies as they’ve watched Bitcoin pull a 5x move in less than six months. Institutions like JPMorgan and Morgan Stanley are eyeing the Bitcoin market, whereas firms like BNY Mellon have already started to custody the digital asset.
Bank of America Claims It Costs Just $93 Million To Move Bitcoin’s Price By 1%
The now infamous Bank of America research note slamming Bitcoin also contains research suggesting that it takes just $93 million worth of inflows to move Bitcoin’s price by one percent.
“Bitcoin is extremely sensitive to increased dollar demand,” said the note authored by Bank of America strategist Francisco Blanch, featuring contributions from Philip Middleton and Savita Subramanian.
The analysis found that it would take at least $2 billion worth of inflows to move the price of gold by a single percentile, while more than $2.25 billion would be needed to exert the same price impact on 20-year-plus treasury bonds.
“We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of 1%,” the report concluded, adding:
“What has created the enormous upside pressure on Bitcoin prices in recent years and, particularly, in 2020? The simple answer: modest capital inflows.”
With Bitcoin’s nearly $1.1 trillion market cap equating to roughly 10% of gold’s, the research suggests Bitcoin is twice as volatile as gold per-dollar in-flows despite the asset existing for nearly a dozen years.
The Bank of America researchers attribute the small cost needed to move the price of Bitcoin to heavy accumulation from whales diminishing the number of coins available for purchase on exchanges. “Looking at detailed blockchain records, we find that the largest addresses have not been selling in aggregate since the pandemic began,” they stated.
Bank of America’s assertions appear broadly in line with findings from crypto analytics firm Glassnode, which estimated that 78% of Bitcoin’s supply was illiquid as of December 2020, leaving just 20% of circulating supply available for trade on exchanges.
With the number of new entities active on the Bitcoin network spiking to unprecedented levels, an increasing number of investors are competing for a diminishing pool of BTC, resulting in demand spikes driving prices up with ease.
Earlier this month, Glassnode estimated that 95% of BTC traded last moved on-chain in the last three months, further evidencing that whales are stashing away their coins for the long term. The firm’s co-founders, “Jan & Yann,” tweeted:
— Jan & Yann (@Negentropic_) March 16, 2021
Despite Bank of America’s finding appearing to support Glassnode’s BTC bull-case, the report took a highly negative tone regarding Bitcoin overall — slamming the crypto asset for being volatile, polluting, and an “impractical” means of payment.
Bank Of America Analyst Slams Bitcoin: Buying 1 BTC Is ‘Like Owning 60 Cars’
It looks like 2017 called and wants its Bitcoin condemnation back, with a Bank of America analyst reheating some long standing criticisms of BTC for its clients.
Bank of America analyst Francisco Blanch has slammed Bitcoin as “exceptionally volatile”, “impractical” and an environmentally disastrous asset that’s useless as a store of wealth or an inflation hedge.
For good measure Blanch also asserted the cryptocurrency is an impractical method of payment as it can only handle 1,400 transactions per hour compared to the 236 million transactions processed by Visa.
The report — which echoes the hardline stance taken against crypto by traditional financial institutions in years past — is in stark contrast to other major banks such as Goldman Sachs and JPMorgan, which have since embraced Bitcoin as an asset.
Contradicting the notion that Bitcoin’s fixed supply of 21 million will inevitably drive price growth over time, Blanch argues BTC’s price is driven by supply and demand — asserting that because the supply is fixed, fluctuating demand is the only thing driving the price.
Lead author Blanch (strategists Savita Subramanian and Philip Middleton also contributed) also dismissed the idea that Bitcoin is a safe haven asset. “Bitcoin has also become correlated to risk assets, it is not tied to inflation, and remains exceptionally volatile, making it impractical as a store of wealth or payments mechanism,” the Bank of America researcher stated.
“As such, the main portfolio argument for holding Bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on Bitcoin demand outpacing supply.”
Given many investors are mainly concerned with returns, Bitcoin’s track record of appreciation as the best performing asset over the past ten years may see them dismiss such criticisms.
However, perceptions about Bitcoin’s negative environmental impact may pose a threat to increasing corporate and institutional adoption, as it conflicts with the ‘triple bottom line’ accounting that climate conscious shareholders are increasingly focused on.
BoA states that Bitcoin has a higher carbon footprint than any other human activity in terms of dollar-for-dollar inflows, with the report estimating that Bitcoin’s energy usage has grown more than 200% in the past two years and is now comparable to the Netherlands, Greece and the Czech Republic.
While Bitcoiners often cite figures suggesting that between 39% and 76% of Bitcoin mining uses renewable energy, BoA’s report asserts that in fact three quarters of BTC mining occurs in China where more than half of electricity is produced by coal. Further, it states half of all Chinese mining occurs in Xinjiang province where 80% of power comes from coal.
(This ignores the seasonal migration of miners to Sichuan to take advantage of cheap hydroelectric power during the rainy season. Coinshares estimates that it’s actually miners in the Sichuan province that account for 50%-66% of global hashrate.)
BoA states that rising prices drive up mining difficulty which inexorably adds to Bitcoin mining’s carbon output.
“The rising complexity of the system creates ultimately a vicious environmental cycle of rising prices, rising hashpower, rising energy consumption and, ultimately, rising CO2 emissions.”
BoA calculated that a $1 billion investment in Bitcoin produces the same carbon emissions as 1.2 million petrol powered cars over the course of a year — which means Tesla’s $1.5 billion investment is equivalent to adding 1.8 million petrol powered cars onto the roads each year, undermining the electric car maker’s environmental credentials.
And retail ‘wholecoiners’ weren’t spared from environmental blame with the analyst claiming: “A single Bitcoin purchase at a price of ~$50,000 has a carbon footprint of 270 tons, the equivalent of 60 ICE [petrol] cars.”
Leaving no criticism alone, Blanch also noted 181 companies faced risks linked to Bitcoin around “money laundering, corruption, bribery, fraud, and breaches of data privacy” and that Central Bank Digital Currencies also pose tremendous long term threats to Bitcoin.
It’s worth noting the BoA report mainly documents the view of a single analyst and opinions vary within large organizations. Even at the overall pro-Bitcoin Goldman Sachs, some divisions have made similar criticisms of Bitcoin, while other divisions talk up Bitcoin as the future.
It’s clients may also disagree with the analysis. Bank of America’s January fund manager survey found that going ‘long Bitcoin’ was the ‘most crowded trade’ of the month.
Bitcoin Price Impact
I love this line from Bank of America Corp. research strategists:
* “What has created the enormous upside pressure on Bitcoin prices in recent years and, particularly, in 2020?” BofA asked. “The simple answer: modest capital inflows.”
If you take out the word “modest,” that’s the most basic market tautology: The price went up because more people wanted to buy it. (The usual phrase, used mostly as a joke, is “more buyers than sellers.”) But of course they put in the word “modest.” The price went up because a couple of people wanted to buy a little of it, and it’s very sensitive to that. It is a brutal, quiet dig at the size and efficiency of the Bitcoin market:
* “Bitcoin is extremely sensitive to increased dollar demand,” the BofA strategists said in a note Wednesday. “We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of 1%, while the similar figure for gold would be closer to $2 billion or 20 times higher. In contrast, the same analysis for the 20-year-plus Treasuries shows that multibillion money flows do not have a significant impact on price, pointing to the much larger and stable nature of the U.S. Treasuries markets.” …
* BofA notes that since about 95% of total Bitcoin is owned by the top 2.4% of addresses with the largest balances, it’s “impractical as a payments mechanism or even as an investment vehicle.”
But that makes it a good speculative vehicle: There just isn’t very much of it for sale, so the price is very sensitive to relatively small events, so it’s exciting.
UBS (A Totally Corrupt And Criminal Bank) Warns Clients Crypto Prices Can Actually Go To Zero
Strategists at one of the world’s largest wealth managers are issuing a warning to newbie crypto investors plunging into the record rally: You could still lose all your money.
Between regulatory threats and central bank-issued competitors, there’s nothing stopping a wipeout in big-name digital currencies eventually, according to UBS Global Wealth Management.
* U.S. Sues UBS Over Mortgage Securities
* UBS To Pay $68 million To Settle State Libor-Manipulation Claims
* UBS Group AG Faces $5 Billion Fine From A French Court For Illegally Helping French Clients Hold Undeclared Swiss Accounts
* CFTC Names Four Banking Organization Companies (Including UBS), And A Trading Software Design Company And Six Individuals In Spoofing-Related Cases
As Wall Street jumps on the Bitcoin rally like never before, the Swiss firm says prices may rise in the near term, but the industry faces existential risks over the long haul.
“There is little in our view to stop a cryptocurrency’s price from going to zero when a better designed version is launched or if regulatory changes stifle sentiment,” authors including Michael Bolliger, the chief investment officer for global emerging markets, said in a report Thursday. “Netscape and Myspace are examples of network applications that enjoyed widespread popularity but eventually disappeared,” the strategists wrote in response to rising client interest.
With Bitcoin slumping back to $35,000, the famously volatile asset class is stoking debate among the world’s biggest money managers. While famed investors including Paul Tudor Jones and Stan Druckenmiller are entering the industry, critics see gambling, scandal and manipulation.
In the near-term crypto prices could climb anew powered by market momentum, institutional adoption and limited supply. But over the long term, the market risks regulatory intervention, the strategists said, citing the U.K.’s decision to ban sales of certain crypto-derivative products to retail investors.
Like most firms, UBS Wealth is skeptical on the real-world utility of virtual tokens, but stop short of calling crypto prices a bubble, given the difficulty of determining a fair value for an asset without cash flows.
Other investors have put ambitious price targets on Bitcoin, saying it’s destined to keep rising as more institutional investors sell their gold holdings in favor of the digital currency in order to diversify portfolios. Scott Minerd of Guggenheim Investments said Bitcoin could be worth about $400,000, while JPMorgan Chase & Co. strategists see a case for $146,000 in the long run.
“Investors in cryptocurrencies must therefore limit the size of their investments to an amount they can afford to lose,” UBS Wealth said.
Swiss Banking Giant UBS To Reportedly Offer Rich Clients Crypto Investments
Crypto investment offerings for wealthy clients will be limited to a small fraction of their portfolios due to the volatility of the asset class, sources say.
UBS Group AG is exploring various ways to offer its wealthy clients the possibility of investing in digital assets, anonymous sources claim. A new report from BNN Bloomberg suggests that investment opportunities in crypto will remain limited to “a very small portion of the clients’ total wealth” due to concerns over the volatility of the cryptocurrency markets.
Sources familiar with the Swiss firm’s plans suggest that investments in digital assets via third-party investment vehicles could be one of the options open to clients. None of the sources have agreed to be identified due to the private nature of UBS’ plans, which reportedly remain in their early stages.
UBS CEO Ralph Hamers, who replaced Sergio Ermotti in 2020 to the surprise of many, has a reputation for being strong on digitalization and automation. Hamers was CEO at ING Group from 2013 to 2020, where his record was mixed.
Many lauded his modernization and profitability drive yet also criticized his tenure after the bank was charged with allowing hundreds of millions of euros to be laundered via its accounts between 2010 and 2016. The bank’s 775-million euro penalty in 2018 for compliance failures was the highest ever imposed on a company by the public prosecution service in the Netherlands.
Now tasked with axing costs and trying to galvanize UBS’ revenues, he has this year stressed the need to meet “clients’ digital expectations,” particularly in the immediate aftermath of the coronavirus pandemic. A critic of central banks’ loose monetary policies, Hamers is focusing on technology investments at UBS and has shifted to a quarterly allocation to technology projects as opposed to the firm’s previous strategy of fixed funding on an annual basis.
He has also been an advocate of using artificial intelligence to better understand clients’ demands and is prioritizing the digitization of execution platforms and services at UBS’ investment bank and improving digital services more broadly.
Bloomberg’s sources have alleged that UBS is concerned it will lose clients if it does not step up to offer them investment opportunities in digital assets. Prior to UBS, the likes of Goldman Sachs, Morgan Stanley and BNY Mellon all deepened their involvement in the digital assets sphere this year.
Bank of Canada Calls Crypto Assets An Emerging Vulnerability
The Bank of Canada said volatility in cryptocurrency assets is an emerging vulnerability to the country’s financial system, a day after a major selloff in the sector.
In its annual review of financial risks, policy makers led by Governor Tiff Macklem said Thursday that while crypto markets are not yet of systemic importance as an asset class or method of payment, that could change “if a large technology firm — a so-called Big Tech — with a sizable user base decided to issue a cryptocurrency that became widely accepted as a means of payment.”
It’s not the first time the bank has cited crypto as a rising concern; it also did so in the 2019 version of the review.
The central bank also flagged risks associated with so-called stablecoins — cryptocurrencies that are pegged to a more stable asset to reduce volatility. If widely used, they have the potential to disrupt the bank’s monetary policy mechanisms. “Unless stablecoins are backed exclusively by Canadian dollars, their widespread adoption could inhibit the Bank’s ability to implement monetary policy and act as lender of last resort,” the bank said.
Cryptocurrencies sold off broadly on Wednesday, with Bitcoin briefing dropping to about $30,000, but have bounced back. Bitcoin was trading just below $42,000 as of 10:12 a.m. on Thursday.
“Despite the broadening institutional interest in cryptoassets, they continue to be considered high risk because their intrinsic value is hard to establish,” the Bank of Canada said.
Bank of Canada Warns Home Buyers Rates Will Eventually Rise
Bank of Canada Governor Tiff Macklem said recent gains in home prices aren’t sustainable and warned households against taking on too much mortgage debt because interest rates will eventually rise.
In an opening statement at a press conference to discuss financial stability, Macklem said some households have taken on “significantly” more debt, with many carrying very large mortgages relative to income. Borrowers and lenders need to understand that interest rates won’t always be at historic lows, and home buyers won’t be able to rely on rising values.
“It is important to understand that the recent rapid increases in home prices are not normal,” Macklem said, after the release of the Bank of Canada’s annual Financial System Review. “Counting on ever higher house prices to build home equity that can be used to refinance mortgages in the future is a bad idea.”
The comments come on the heels of one of the biggest upswings in Canadian housing ever, with prices climbing more than 30% over the past year in many markets. Canadians are so alarmed by the red-hot housing market that many say they’d like to see the central bank raise the cost of borrowing to dampen demand for real estate and stabilize prices.
In its report, the Ottawa-based central bank said debt vulnerabilities are intensifying amid a surge in housing prices that’s being driven in part by speculative activity. There are signs people are buying houses with the expectation prices will continue to rise, which creates unsustainable dynamics. Taking on larger mortgages, meanwhile, puts households in a precarious situation should the economy take a downward turn.
Separately on Thursday, Canada’s banking regulator formalized a proposal to make it more difficult for home buyers to secure financing. Under the new qualification rules, which go into effect June 1, buyers will have to show they can afford a minimum rate of 5.25%.
“Interest rates are unusually low,” Macklem said. “Borrowers and lenders both have roles in ensuring that households can still afford to service their debt at higher rates.”
How this analysis plays into the central bank’s policy is unclear. Growing household vulnerabilities could give policy makers more reason to consider raising borrowing costs, for example, though higher rates would also inflate risks — such as slow growth or a housing price correction. Macklem’s next interest-rate decision is due June 9.
Thursday’s report did find Canada’s lenders could absorb a significant amount of losses in the case of another shock. The central bank said household debt and housing market vulnerabilities probably don’t pose a significant systemic threat to bank solvency, even though they could undermine future growth.
“The Canadian financial system went into this crisis in a solid position and has proved to be resilient,” Macklem said in a statement. “This reflects sound risk management across a range of financial system participants combined with Canada’s strong regulatory and supervisory framework.”
Crypto Swings May Become A Threat, Norway’s Central Bank Warns
Norway’s central bank warned that dramatic price swings in cryptocurrency assets could spell trouble for the banking system if lenders continue to increase such investments.
A rout in crypto assets on Wednesday followed remarks by China’s central bank that digital tokens can’t be used for payments. Bitcoin slumped more than 30% before recouping losses hours later.
“We don’t see these swings that we’ve seen yesterday as major threats to financial stability but if exposures continue to increase, that may pose a threat,” Torbjorn Haegeland, Executive Director for Financial Stability, said in an interview on Thursday.
Norges Bank joins other central banks sounding the alarm over the rising popularity of cryptocurrencies. European Central Bank Vice President Luis de Guindos said Wednesday that the tokens shouldn’t be seen as real investments, while Bank of England Governor Andrew Bailey said people should buy them only if they’re prepared to lose their money.
Some of the world’s major central banks have announced plans for digital currencies, as the coronavirus and modern technologies accelerate the push toward cashless transactions.
That, in addition to the ascent of cryptocurrencies, has made the Norges Bank’s explore options such as launching its own digital currency as well, according to Deputy Governor Ida Wolden Bache.
“We notice that there are large swings in the value of different crypto assets but we follow this more on a general level,” she said in the same interview.
HSBC Won’t Offer Bitcoin, Crypto Service To Wealthy, Reuters Says
HSBC Holdings Plc has no plans to start a cryptocurrency trading desk or sell digital currencies as an investment to customers, Reuters reported, citing an interview with Chief Executive Officer Noel Quinn.
The bank isn’t into Bitcoin given its volatility and isn’t promoting it as an asset class within its wealth management business, Quinn said, according to the news agency.
China, a crucial part of HSBC’s pivot to Asia strategy, has continued to clamp down on cryptocurrencies. The People’s Bank of China issued a fresh warning last week that virtual currencies can’t be used as money. Beijing, which is developing a digital yuan, has since 2017 abolished initial coin offerings and clamped down on virtual currency trading within its borders, forcing many exchanges overseas.
HSBC’s conservative view on Bitcoin is a long-held position. Chief Financial Officer Ewen Stevenson said in February that he remains cautious on Bitcoin, but that the bank is open to digital currencies, particularly those linked to central banks.
In 2018, former Chief Executive Officer John Flint said the bank was “very skeptical” about cryptocurrencies.
Bitcoin Not On The Agenda For HSBC Says Bank’s CEO
HSBC will not be joining the growing list of major banks offering Bitcoin and crypto investment products to customers and clients.
The recent tumultuous price action for cryptocurrencies seems to be providing ample opportunity for popular anti-crypto bank HSBC to double down on its negative stance towards virtual currencies.
Speaking to Reuters on Monday, HSBC CEO Noel Quinn said that the bank was not interested in running a crypto trading desk or offering cryptocurrency-related investment packages to its clients.
Quinn identified volatility as a major reason for the bank’s decision despite the emerging trend of other major financial institutions announcing plans to open up crypto investment avenues for their clients.
Earlier in May, investment banking giant Wells Fargo announced plans to debut a crypto investment product for major clients. Also, other major U.S. banks like Morgan Stanley and Goldman Sachs are in various stages of rolling out institutional-grade Bitcoin funds for their customers.
Earlier in May, the New York Digital Investment Group partnered with fintech outfit Fidelity National Information Services to provide a framework for United States lenders to offer crypto trading services to customers.
Detailing HSBC’s reticence on Bitcoin (BTC) and crypto in general, Quinn opined:
“I view Bitcoin as more of an asset class than a payments vehicle, with very difficult questions about how to value it on the balance sheet of clients because it is so volatile.”
The HSBC CEO also took a dig at stablecoins calling into question the reputation of the issuers as well as questioning the extent to which stablecoins in circulation are backed by structured reserves.
Quinn, however, voiced support for central bank digital currencies stating that CBDCs could simplify cross-border payments.
As previously reported by Cointelegraph, HSBC has a noted history of anti-crypto sentiments with the bank blacklisting MicroStrategy stock on its online retail trading platform. At the time, HSBC revealed that the move was due to MicroStrategy’s massive Bitcoin investment drive.
Earlier in the year, the bank also reportedly blocked customers from repatriating profits from crypto exchange platforms to their HSBC accounts.
Standard Chartered Joins Crypto Rush, Days After HSBC Opts Out
Standard Chartered Plc is setting up a joint venture to buy and sell virtual currencies such as Bitcoin — days after its biggest rival HSBC Holdings Plc said it would swerve the crypto trading craze.
The London-headquartered bank said Wednesday its technology arm, SC Ventures, would establish a partnership with BC Technology Group Ltd., a Hong Kong-based investment company specializing in digital assets.
Alex Manson, head of SC Ventures, said he had a “strong conviction that digital assets are here to stay and will be adopted by the institutional market as a highly relevant asset class.”
“We are constructing the building blocks for a safe and reliable investment infrastructure,” Manson said.
The bank’s new partnership will be based in the U.K. and target the European market, helping institutional traders find counterparties. It will offer trading in virtual currencies including Bitcoin and Ethereum, and opens for business in the fourth quarter.
By contrast, HSBC Chief Executive Officer Noel Quinn said last week that his firm would not offer virtual currencies to clients given its volatility.
Billionaire Carl Icahn Says He May Drop Up To $1.5B Into Crypto
Billionaire Carl Icahn may invest up to $1.5 billion into crypto, noting that “much of the cryptocurrency issued today will not survive.”
Former crypto skeptic Carl Icahn, the founder of Icahn Enterprises, told Bloomberg he’s set to enter the crypto market in a “big way” — teasing an investment of around $1.5 billion.
Icahn is an investor and former advisor to the Trump administration, who has a net worth of $15.6 billion according to Forbes. In 2018, Icahn told CNBC that crypto is “ridiculous” and added, “maybe I’m too old for them, but I wouldn’t touch that stuff.”
But speaking on Wednesday, Icahn explained he’s now considering a large investment and that entering the market in such a manner would “not be to buy a few coins or something”:
“I mean, a big way for us would be a billion dollars, billion-and-a-half dollars … I’m not going to say exactly.”
Icahn joins a growing list of fellow billionaires who have changed their tune over crypto in the past 12 months. When asked about what cryptocurrencies he has his eyes on, the billionaire kept his cards close to his chest and emphasized that:
“Much of the cryptocurrency issued today will not survive, but we believe cryptocurrency in one form or another might be here to stay. To be clear, we have never bought any cryptocurrency, but we are studying it.”
Icahn believes that cryptocurrencies that don’t at least serve as a store of value will be flushed out of the market as “there’s gotta be some form of safety of value there” to survive.
Icahn Enterprises is a $14.5-billion American conglomerate with investments in CVR, Pep Boys and Trump Entertainment Resorts.
Ryan Adams, Ether proponent and founder of crypto investment firm Mythos Capital and Bankless, speculated on Twitter that Icahn’s recent kite flying in the media may indicate he has already entered the market:
“If Carl Icahn hasn’t already bought a billion dollars worth of ETH and BTC why would he announce he’s about to buy a billion dollars worth of ETH and BTC.”
The billionaire expanded further on his views about crypto to Bloomberg, saying he now thinks that skepticism over the value of crypto is a “little wrong-headed,” as he questions the intrinsic value of the United States dollar in comparison to crypto, which could be a store of value and hedge against inflation.
“Well, what’s the value of a dollar? The only value of the dollar really, is because you can use it to pay taxes.”
When Ichan was asked “what is your use case?” for crypto, the 85-year-old spoke about the Ethereum network, noting that “with Ethereum, it’s the underlying blockchain. So, Ethereum has two things: You can use it as a payment system, you can use it as a store of value.”
“Bitcoin to me is just a store of value,” he added.
Crypto Can Be Ignored As A Fad, Danish Central Banker Says
Bitcoin and other cryptocurrencies are little more than a speculative fad that central bankers can probably ignore, according to Lars Rohde, the governor of Denmark’s central bank.
The much more serious threat stems from big tech, he said in an interview with Bloomberg Television on Thursday. If technology giants start “invading the currency area” and the means of transaction, then “that could be very interesting and maybe also a real threat to the autonomy and independence of central banks.”
He’s the latest central banker to warn that the disappearance of cash and the dominance of digital payments are upending the age-old framework within which monetary policy has operated. Earlier this month, Bank of England Deputy Governor Jon Cunliffe said governments and policy makers need to ensure they don’t get overtaken by private providers of payment services, and pointed to the “financial stability implications” of such a development.
Central bankers from China to Sweden are already working on their own digital currencies in response to the falling use of cash. But the process is fraught with technical and legal hurdles, making it harder to complete than initially anticipated. Denmark isn’t among the frontrunners, though neighboring Sweden may have a digital central bank currency within five years, according to Riksbank Governor Stefan Ingves.
Riksbank First Deputy Governor Cecilia Skingsley said she’s “observant but not concerned” about financial market novelties including cryptocurrencies, speaking at an online seminar on Thursday.
“Everyone can choose to invest in cryptocurrencies, but you should be aware that it’s very different from traditional financial assets,” Skingsley said, adding she hasn’t seen “any crypto assets with an underlying real value.”
The intense spike in speculation surrounding cryptocurrencies has raised questions as to whether they have the potential to disrupt major markets such as currencies and bonds. European Central Bank Vice President Luis de Guindos said earlier this month that the tokens shouldn’t be seen as real investments, while Bank of England Governor Andrew Bailey said people should buy them only if they’re prepared to lose their money.
Rohde said he’s “tempted to ignore” Bitcoin and other cryptocurrencies. “It’s a very speculative asset at best. There is no stability and no guarantee from any side about the value of cryptocurrencies.”
In Denmark, the main role of the central bank is to defend the krone’s peg to the euro. That’s required it to keep its main policy rate negative since mid-2012, which is longer than anywhere else in the world.
Big Tech, Not Cryptocurrency, Is The Real Threat To Central Banks’ Autonomy, Danish Central Bank Governor Says
Though Danmarks Nationalbank’s governor seems tempted to ignore cryptocurrencies, other banks in the country continue to launch new services based on crypto.
Crypto trading volumes continue to increase, but several countries’ central banks are keen to ignore it, with Denmark being the latest to join the “crypto is negligible” narrative. Lars Rohde, governor of the country’s central bank doesn’t see the rise of crypto trading as a serious economic threat.
“I could be tempted to ignore it,” he told Bloomberg. “I think the term currency is badly used here. Most currencies store value or are means of transactions. There is no stability, no guarantee about the value of cryptocurrencies.”
Crypto is a speculative asset at best, he added.
When asked about the central banks’ moves to reduce speculative rivalry from crypto, he admitted he is more watchful of major tech companies’ moves in the payments field. Big tech’s invasion of the currency area is much more interesting, he opined.
“If tech giants get a hold on the means of transaction, then that could be a real threat to the autonomy and independence of central banks.”
Denmark was one of the earliest countries to explore the possibility of a central bank digital currency, or CBDC. The Danmarks Nationalbank discarded the idea following a one-year study from 2016 to 2017, deciding that a CBDC solution would do little to improve the current financial infrastructure of the country.
The central bank’s opinions don’t seem to have had much of an affect on other banks in the country, however. This week for instance, Denmark’s Saxo Bank announced that they are launching a new crypto FX product. This will enable users from the Middle East and North Africa, or the MENA region, to trade major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Litecoin for fiat currencies from a single margin account.
Other central banks around the world have voiced different takes on cryptocurrencies. The Central Bank of Kuwait issued a warning on crypto usage last week, while Canada’s central bank said it considers Bitcoin and other crypto-assets to be high risk “because their intrinsic value is hard to establish.”
De Nederlandsche Bank NV, the Dutch central bank, took a neutral stance on crypto trading in a recent statement which noted, “A crypto does not represent anything. It’s not a share in anything. It’s not a loan which is returned with interest.”
Bank of Japan Governor Slams Bitcoin, Calls BTC A Speculative Asset
The BOJ governor says Bitcoin is a speculative play, while issuing warnings over price volatility.
Haruhiko Kuroda, governor of the Bank of Japan, has joined the roll call of central bankers taking aim at Bitcoin (BTC) amid the current volatility.
According to a report by Bloomberg on Friday, Kuroda argued against the value proposition of the largest cryptocurrency by market capitalization, stating:
“Most of the trading is speculative and volatility is extraordinarily high. It’s barely used as a means of settlement.”
The BOJ governor’s criticism comes as Bitcoin experienced an over 50% drawdown from its $64,000 all-time-high price milestone achieved back in mid-April.
Indeed, several central bankers have taken Bitcoin’s current price wobble as an occasion to slam BTC and cryptocurrencies in general.
Earlier in May, Luis de Guindos, vice president of the European Central Bank, also expressed negative sentiments about Bitcoin. As reported by Cointelegraph at the time, the ECB executive argued that cryptocurrencies had weak fundamentals and did not qualify as a real investment.
Recently, Lars Rohde, governor of Denmark’s central bank, dismissed the possibility of cryptocurrencies posing a threat to central bank autonomy. According to Rohde, big tech, not crypto, is the real competitor to gatekeepers of the legacy finance arena.
— PlanB (@100trillionUSD) May 28, 2021
Also in May, Andrew Bailey, governor of the Bank of England, warned that crypto investors were liable to lose all their money. However, as tweeted by PlanB, creator of the Bitcoin stock-to-flow model, long-term BTC “hodling” — owning Bitcoin for at least 200 weeks (four years) — has never resulted in a loss position for owners.
In fact, despite Bitcoin’s 50% decline since mid-April, BTC is still up about 22% year-to-date and has returned fourfold gains for holders over the last year. Billionaire hedge fund manager Ray Dalio has even tipped Bitcoin to be a better savings instrument than government bonds.
Apart from slamming Bitcoin, Kuroda also echoed the sentiments of other central bankers concerning the potential viability for stablecoins as long as their issuers conform to strict regulatory protocols.
Kuroda Joins Chorus of Central Bankers Casting Doubt On Bitcoin
Bank of Japan Governor Haruhiko Kuroda joined the chorus of central bankers chiming in on Bitcoin following its latest surge and slide.
“Most of the trading is speculative and volatility is extraordinarily high,” Kuroda said in an interview Thursday. “It’s barely used as a means of settlement.”
His remarks resonated with similar comments by his peers. Federal Reserve Chair Jerome Powell said in April that cryptocurrencies are simply vehicles for speculation. Likewise, European Central Bank Vice President Luis de Guindos says the tokens shouldn’t be seen as real investments.
Bank of England Governor Andrew Bailey has made several forays into the debate this month, warning cryptocurrencies have no intrinsic value and that people should only buy them if they’re prepared to lose their money.
Bitcoin has been on a roller-coaster ride in recent months. Prices surged 16% Monday after plunging up to 18% on Sunday to continue a series of wild swings experienced by a range of cryptocurrencies.
The token was buffeted after China’s State Council reiterated its call to curtail mining and trading. Earlier sell-offs were spurred by onetime proponent Elon Musk, who did an about-face and criticized Bitcoin over energy usage during mining. The extreme volatility caused by one man’s tweets has added to the picture of instability.
Kuroda differentiated the cryptocurrency from stable coins that have assets to back up their value. Stable coins must also meet legal standards and healthy governance codes, so they could become a convenient way of payment in the future, he added.
Still, volatility aside, Bitcoin has still clocked up around 30% gains year to date. Ray Dalio, founder of Bridgewater Associates, said that should cryptocurrencies continue to gain traction, investors might decide to invest in them rather than government bonds.
‘Crypto Will Cause The Next Financial Crisis’: Precious Metals Boss, CEO Brett Heath
Metalla Royalty & Streaming CEO Brett Heath has warned that crypto will “lead the charge into the next financial crisis” and questioned the true intrinsic value of Bitcoin.
Brett Heath, CEO of precious metals royalty and streaming company Metalla Royalty & Streaming, has warned that crypto will “lead the charge into the next financial crisis.”
Metalla Royalty & Streaming is a Canadian-based firm founded in 1983 and has a current net worth of almost half a billion dollars. Metalla offers exposure to precious metals through gold and silver royalties and streams.
Speaking to financial news outlet Kitco News on Friday, Heath compared crypto to the tech induced crash of the early 2000s and the 2008 mortgage crisis, noting that:
“When you look back the last few decades and you look at all of the financial crises that happened, you know, they all have a couple of things in common. And one of them is the mass adoption of a new financial product or a new technology that’s not very well understood.”
“If we just rewind to the mortgage crisis of 2008 […] We had the mass adoption of mortgage-backed securities, collateralized debt obligations. And once the public had embraced this, this new financial product, then it crashed. It was a huge problem,” he added.
The CEO described cryptocurrencies as a “license for the private sector to print money” as he questioned the amount of liquidity that has been pumped into the market since the beginning of 2020.
Heath drew a comparison with the United States’ M1 — total liquid money in circulation — noting that since January 2020, the M1 has “increased by four and a half times.” According the Federal Reserve, the M1 went from $4.018 billion in January 2020 to around $18.935 billion as of April 2021. Heath emphasized that:
“That’s an extraordinary increase, and it’s such a short period of time. But if you look at cryptocurrency using the total market cap of cryptocurrency, it’s over tenfold.”
Heath appears to hold concerns over systemic risk from mass investment into an asset class that he feels holds “no intrinsic value,” with the end result being a sell-off similar to the tech crisis of the early 2000s:
“When you have that amount of capital wiped out of digital wallets across the globe, you better believe there’s going to be some significant financial repercussions that are felt,” he said.
The precious metals proponent appears unfazed by predictions of Bitcoin surpassing gold as a store of value. He also questioned the notion that Bitcoin’s max supply of 21 million gives it scarcity or value and pointed to other cryptocurrencies of lesser value that are backed by what he says is better technology:
“What about the other 10,000 cryptocurrency-related tokens and coins that exist today, many of which have better technology, better privacy, and use a ton of a lot less energy?”
“When there’s so much, what’s the value or what’s really that intrinsic value?” he added.
Russian Bitcoin Critic Says He Would Have Bought BTC For 100 Rubles
One of the biggest Bitcoin critics, Russian official Anatoly Aksakov, said he wanted to buy Bitcoin before the ban, but the price was too high.
Anatoly Aksakov, a member of Russia’s State Duma and a key spokesman for the country’s cryptocurrency legislation process, claimed that he has never owned any Bitcoin (BTC).
Aksakov said that he doesn’t hold any Bitcoin and likely won’t, as the government has prohibited officials from purchasing crypto, local news agency TASS reported on Thursday.
The official went on to say that he was willing to buy some Bitcoin as an investment before the ban came into force last year. However, he thought that the price was too high at the time:
“I wanted to buy only in order to accumulate. But Bitcoin had already surged too much, and I was upset about spending money. If it had cost 100 rubles, I would have bought it.”
In the interview, Aksakov also argued that Bitcoin should not be available to unqualified investors due to its extreme volatility. He also touched upon the development of Russia’s crypto tax regime, noting that crypto tax reports are currently made on a voluntary basis, as a draft bill that would make reporting mandatory has only passed its first reading in parliament.
Aksakov is a major financial official in Russia who serves as chairman of the Russian State Duma Committee on Financial Markets as well as a member of the Bank of Russia’s National Banking Council. He has emerged as a major Bitcoin critic, predicting last year that BTC had no future.
Aksakov’s remarks come shortly after another regulatory initiative suggested to partially lift the country’s ban on crypto payments in late May. The country officially enforced the ban in January as part of its major cryptocurrency law, “On Digital Financial Assets.”
Berkshire Hathaway Invests $500M In Brazilian Digital Bank
Though its billionaire owner has personally spoken out against digital assets many times, Berkshire Hathaway’s investment may indicate the firm is more open to the idea.
Brazilian digital bank Nubank has raised $500 million from Berkshire Hathaway, a multinational holding company run by billionaire Warren Buffett.
In an announcement from Nubank on Tuesday, the digital bank said the $500 million investment would be used to continue its international expansion — the company recently launched in Colombia — as well as attract new executives from major tech companies. Nubank reported it has more than 40 million customers in Brazil, Mexico and Colombia.
Nubank CEO David Vélez said the funding would help in “democratizing access to financial services” across Latin America. He said that only half the people in the region have bank accounts, with roughly 21% using credit cards.
“No one thought it was possible to change the financial system, but we were always convinced that there was room for disruption and innovation and, more importantly, that customers deserved better service,” said Vélez.
Buffett has personally spoken on Bitcoin (BTC) and other cryptocurrencies previously, saying they “basically have no value” and that he will never own any himself. In a shareholders meeting last month, vice chair Charlie Munger referred to crypto as “useful to kidnappers and extortionists.”
However, over the last year, the multinational conglomerate has invested in more firms related to technology and beyond, including cloud technology company Snowflake. Berkshire Hathaway also holds billions of dollars worth of Apple and Amazon stock as of March 31.
Dutch Official Calls For Complete Ban On Bitcoin
The Netherlands must ban the mining, trading and holding of Bitcoin because it doesn’t meet any of the three functions of money and is handy for criminals, one Dutch official argued.
While El Salvador adopts Bitcoin as legal tender, one Dutch official blasted the cryptocurrency, calling for an urgent blanket ban.
Pieter Hasekamp, director of the Dutch Bureau for Economic Analysis under the Ministry of Economic Affairs and Climate Policy, published an essay entitled “The Netherlands must ban bitcoin.”
In line with the essay’s title, Hasekamp lists a wide list of reasons why the Dutch government must enforce an immediate total ban on mining, trading and holding Bitcoin (BTC). According to the official, this could cause the price to plummet because Bitcoin “has no intrinsic value and is only valuable because others may accept it.”
The executive cited a common anti-crypto narrative, arguing that any cryptocurrency is unable to fulfill any of the three functions of money as a unit of account, means of payment and store of value. He also cited other common anti-Bitcoin arguments, such as security concerns, risks of fraud and scams, and argued that the crypto is useful tool for criminal actors.
Hasekamp said that the Netherlands has been lagging behind countries that have moved to “curb the crypto hype” in recent years. “Dutch regulators attempted to tighten up the supervision of trading platforms, but without much success. The Central Planning Bureau pointed out the risks of crypto trading in 2018, but concluded that stricter regulation was not yet necessary,” the official wrote.
In his essay, Hasekamp paid special attention to Gresham’s law, a monetary principle that states that overvalued currency, or “bad money,” tends to drive a legally undervalued currency, or “good money,” out of circulation. Calling Bitcoin “bad money,” Hasekamp argued that Gresham’s law could work the opposite way with Bitcoin:
“Cryptocurrencies demonstrate all the hallmarks of ‘bad money’: unclear origin, uncertain valuation, shady trading practices. […] Is Gresham’s law back? No, on the contrary. Cryptocurrencies are not used in regular payment transactions. […] Bad money disappears from circulation because nobody wants to accept it anymore.”
El Salvador’s Bitcoin Adoption An ‘Interesting Experiment,’ Says Bank of International Settlements Exec
El Salvador’s move to make Bitcoin legal tender in the country continues to elicit reactions from legacy finance gatekeepers — this time, from the Bank for International Settlements.
Benoît Cœuré, Bitcoin (BTC) critic and the head of the innovation hub at the Bank of International Settlements, called El Salvador’s historic move to make BTC legal tender in the country an “interesting experiment.”
According to Reuters, Cœuré made this assertion during the launch of the BIS’s fourth innovation hub in England on Friday, stating:
“We have been clear at the BIS that we don’t see bitcoin as having passed the test of being a means of payments. Bitcoin is a speculative asset and should be regulated at such.”
As previously reported by Cointelegraph, El Salvador’s parliament passed a bill to make Bitcoin legal tender in the country. The legislative vote on president Nayib Bukele’s “Bitcoin Law” passed by an overwhelming supermajority of 62 out of 84 votes.
Back in November 2018, Cœuré called Bitcoin the “evil spawn of the  financial crisis.” Cœuré’s comments about the need for strict crypto regulations are a common theme within the BIS, with general manager Agustín Carstens also routinely calling for more stringent cryptocurrency laws.
Cœuré’s comments are coming on the heels of similarly stark warnings from the International Monetary Fund (IMF) in the wake of El Salvador’s decision. Reacting to the news, the IMF stated that the decision could pose significant legal and financial ramifications.
Indeed, reports indicate that Bitcoin could be a topic of discussion between the IMF and El Salvador’s president on a planned $1-billion program.
On Thursday, the Basel Committee on Banking Supervision published a consultation paper that placed Bitcoin in its highest risk category. As part of its recommendations, the global banking regulator called for banks keen on crypto exposure to hold $1 capital for every $1 worth of BTC held in custody.
Bitcoin Has Failed Miserably As Currency, Says NYU’s ‘Dean Of Valuation’
The serial Bitcoin critic has once again dismissed BTC’s value proposition as a form of currency.
Business, has reiterated his criticism of Bitcoin (BTC).
Appearing on episode 10 of the Moneycontrol Masterclass program, the NYU professor doubled down on his longstanding repudiation of Bitcoin as currency.
According to Damodaran, Bitcoin’s limited use in microtransactions flies in the face of claims that BTC is viable as a form of money, stating:
“A good currency, in my view, is one that’s used to buy coffee, buy your house, buy a car, and on that count, Bitcoin has failed, and not just failed, it’s failed miserably.”
For the NYU professor dubbed Wall Street’s “dean of valuation,” Bitcoin’s only claim to fame is in the returns earned by early investors. “When I run into Bitcoin enthusiasts, they seem to push this notion that Bitcoin is a great currency because they’ve made a lot of money on it,” Damodaran said.
The NYU professor has previously offered similar variants of this anti-Bitcoin commentary revolving around BTC not being a viable form of currency. During the bull market run of 2017, Damodaran argued that market capitalization growth was not a suitable metric to determine Bitcoin’s success.
Back in April, Damodaran identified volatility and high transaction costs as major impediments to Bitcoin’s viability as a medium of exchange. The NYU professor’s critique does not, however, account for growing BTC adoption in the face of financial censorship in many places across the globe.
Apart from dismissing Bitcoin as currency, Damodaran also disagreed with the notion that BTC is a hedge against inflation. According to the NYU professor, BTC behaved like a risky stock during the market upheaval of March 2020.
Damodaran did not mention that Bitcoin closed out 2020 with a seven-fold price increase against the Black Thursday crash of March 2020.
The professor’s pivot from bashing Bitcoin as a currency to repudiating it as an asset class also seems to be an emerging theme. Back in May, Damodaran stated that Ether (ETH) stood a better chance of becoming a commodity than BTC.
Bitcoin Volatility Still A Concern For CEO Of BNY Mellon Subsidiary
Francesca Fornasari believes that Bitcoin may not be suitable for most institutional investors.
Despite BNY Mellon’s entrance into Bitcoin (BTC), the CEO of one of the company’s asset management units is still sceptical about major risks associated with the world’s largest cryptocurrency.
Francesca Fornasari, head of currency solutions at BNY Mellon’s subsidiary Insight Investment, believes that Bitcoin may not be suitable for most institutional investors due to extreme volatility, low liquidity, governance issues and environment-related risks.
In a Tuesday Bloomberg interview, Fornasari said that Bitcoin can be more difficult to evaluate than gold due to its massive price swings, which further complicates its possible reactions in an inflationary environment.
“At the end of the day, you should be aware of the fact that if you’re investing in Bitcoin, there’s a whole number of different factors and considerations that are going to affect the value of your investment, that have nothing to do with inflation or inflation hedges,” she said.
The foreign exchange expert stated that Bitcoin’s slow and expensive transactions could be a major impediment to mainstream adoption. “We’re skeptical in terms of the ability of Bitcoin to take over as a means of payment,” Fornasari said.
However, Insight Investment is optimistic about altcoins, or other cryptocurrencies than Bitcoin and expects to see a rise in such digital assets, particularly those that solve issues like the speed and cost of transactions, energy usage and volatility, according to Fornasari.
Insight Investment is one of the largest global asset management companies with around $1 trillion in assets under management. The company has been a subsidiary of BNY Mellon since 2009 after the U.S. banking giant acquired it from Lloyds Banking Group.
The firm’s sceptical stance on Bitcoin comes despite BNY Mellon actively moving into Bitcoin after the bank announced its plans to custody and transfer Bitcoin and other crypto as an asset manager in February this year. The firm also argued that underperformance of one of its exchange-traded funds was caused by the lack of exposure to companies investing in Bitcoin.
Why Bitcoin Needs Its Critics
In the past, Taleb has been a huge advocate of the digital currency. He has commented that individuals “cannot ignore the bitcoin story,” claiming it had come quite far in the time it had been available to traders. He touted it as a powerful asset, and it was time to take the currency seriously.
However, now it looks like Taleb is reversing his stance. In a recent interview, he commented that bitcoin – without a government backing it up – has not managed to pick up speed and has failed to provide the decentralized financial space that people have been demanding. He says it is not a “safe haven” investment, and likely never will be.
Few assets in financial history have been more fragile than bitcoin.
Recently, the author published a paper detailing the asset and what it takes to maintain it. He claimed in the document that the value of bitcoin was “exactly zero,” and said the maintenance efforts behind BTC required far too much. The report further mentioned that assets like gold and precious metals were far stronger than bitcoin could ever be. It read:
Gold and other precious metals are largely maintenance free, do not degrade over an historical horizon, and do not require maintenance to refresh their physical properties over time.
Taleb also took issue with the idea of bitcoin ever serving as a hedge tool against inflation. He commented that bitcoin ultimately dropped more than gold and the stock market in March of last year, thereby proving that it could never work in such a role. He said:
It cannot remotely be used as a tail hedge against systemic risk.
Lastly, he mentioned that bitcoin was far too internet dependent, and he shuddered to think what would happen if there was ever an internet outage even on a local scale. While he likes the idea of a non-government-issued currency, he does not feel bitcoin has succeeded in this category.
A Currency Without a Government Is Still In Need
In His Report, He Writes:
It is indeed desirable to have at least one real currency without a government, but the new currency just needs to be more appealing as a store of value by tracking a weighted basket of goods and services with minimum error.
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