Digital currencies are a fad – or even pyramid schemes: billionaire investor
While it may not be a bubble, billionaire investor Howard Marks has warned clients to be very wary of Bitcoin and the emergence of cryptocurrencies.
Marks, who co-chairs Oaktree Capital which boasts $99 billion in assets under management, issued the warning in an investor note on Wednesday.
Digital currencies have surged in 2017, with Bitcoin alone, up 160% to more than $2,550.
“In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it,” Marks said.
“I’d guess these things (digital currencies) have arisen from the intersection of (a) doubts about financial security — including the value of national currencies — that grew out of the financial crisis an (b) the comfort felt by millennials regarding all things virtual,” he said. “But they’re not real.”
“Some people are eager to speculate on digital currency for profit,” he added. “Others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out. But they’re not real,” Marks said again.
“People tell me these currencies are solid, because (a) they’re secure against hacking and counterfeiting and (b) the software used to generate them strictly limits the amount that can be created. But they’re not real,” he reiterated for a third time. ” Nobody has been able to make sense to me of these currencies.”
Marks acknowledged that while he may be too technically backward to fully appreciate the technology, “it is my firm view that the ability of these things to gain acceptance is just one more proof of the prevalence today of financial naiveté, willing risk-taking and wishful thinking.”
He stressed that serious investing was buying because the price is attractive to something’s intrinsic value – whereas, by definition, “speculation” occurs when trying to buy something without any consideration of it underlying value or appropriateness of its price.
“It isn’t unreasonable for someone to use Bitcoin to pay for something–or for a seller to accept Bitcoin in payment based on an agreement between the parties: barter takes place all the time. But does that make it ‘currency’?”
You can read his full investor note here.
Read: Reserve Bank to begin testing Bitcoin and cryptocurrency regulations
Loading ...