I Wouldn’t Recommend Anyone Invest In Cryptocurrencies

“I wouldn’t recommend anyone invest in cryptocurrencies,” was a quote from John Paulson.  He continued, “I would describe them as a limited supply of nothing. So to the extent there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.”

Two points on why I am writing on this:

  1. This guy shorted the housing market in 2007 making billions of dollars. It was such a huge move they made a movie about. So, he does have some financial credentials
  2. Two, unlike Warren Buffet and company, he explains his position better and more efficiently than most crypto haters and doesn’t come off as someone who is just sour they missed out on the crypto boom.

I read the above quotes from Paulson in an older yahoo!finance article, the article went on to say:

It’s also worth wondering just how much value an asset can truly have if it’s price can swing so wildly from one minute to the next, as Bitcoin’s did on Tuesday. That kind of volatility brings to mind the dot-com bubble of the early 2000s and the housing crash Paulson previously profited from. Both were the result of empty assets attracting billions in ignorant money.

These points, were from the writer of the article and not from Paulson, but I will take a second to point out their absurdity. They compared crypto to two things that have been on decades plus runs since their crashes.  So, not sure what they the author is saying, other than, like most volatile investments, crypto will swing up and down. 

Back to Paulson, he continued, “Once the exuberance wears off, or liquidity dries up, they will go to zero.”

So, I am not sure how exuberance lasts over a decade so far, but even so, the idea that all crypto goes to zero is just not going to happen. (Plenty of individual alt-coins will end up worthless, but, that is not the argument. I have also written on if Bitcoin will go to zero.)  If Paulson believes this, he should have the same thought on the US Dollar. When the US left the gold standard, the worth was propped up by “exuberance” or confidence of the people using the dollar. 

Don’t believe me, look at this quote from the US Congressional Budget Chairman John Yarmouth (D-KY) 

"We can’t go bankrupt. We absolutely cannot go bankrupt because we have the power to create as much money as we need."

Worst take ever, from someone trusted to run a whole country. If a budget chairman can have this though process, and the dollar still remain strong, I am not sure how BTC, which is finite, goes to zero because of lace of exuberance.

Without getting bogged down, as there are plenty of articles here about the actual value of crypto, just think about this.  Paulson’s argument is that crypto is a limited amount of nothing. Ok, if that is his argument, what does it mean when congress and the budget chairman says they have an unlimited amount of nothing.

I think the one that ends up with value is the one that has a limited amount backed by a decentralized system actually built on...well, there was a white paper written on that in 2009.

(One last point. The yahoo!finance article ended by advertising multiple investments you should put your money in. So in essence, they wrote an article to scare you into buying other products they make money off of advertising. So, trust them at your peril.)

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I am an American aquarium drinker. I assassin down the avenue. I'm hiding out in the big city blinking. What was I thinking when I let go of you?

Interesting Thoughts, That Aren't Always Mine
Interesting Thoughts, That Aren't Always Mine

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