Here’s why billionaire John Paulson’s ‘worthless’ call might be right

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Crypto crash: Here’s why billionaire John Paulson’s ‘worthless’ call might be right

Seems like cryptocurrency has been seen as a worthless fad since Bitcoin first emerged from the bowels of an anonymous engineers’ computing platform in 2009.

While some of the criticism has come from the general public, who may not have a clear idea of ​​what cryptocurrencies are, how they work, or why they have any value, some very financial minds. savvy people have also questioned the growing importance of cryptos.

One such critic is billionaire investor John Paulson, who in recent comments called digital currencies a bubble that will ultimately prove to be worthless.

The volatility seen in the crypto markets over the past few days Bitcoin fell 17% at some point on Tuesday, the same day El Salvador started accepting it because legal tender doesn’t offer much defense against it. Paulsons reviews.

Let’s see what his deal is with crypto, and whether you should cash in or buy the drop.

Paulsons’ reasons for being bearish in crypto

Hello, my name is Jacco / Shutterstock

Paulson has experience in exposing at least one notable financial scam. As a co-founder of The Carlyle Group, he was one of the hedge fund heavyweights who saw corruption at the heart of the subprime mortgage industry and then bypassed the US real estate market before it it only collapsed in 2007, earning it $ 4 billion.

And he seems to be just as skeptical about crypto.

I would not recommend anyone to invest in cryptocurrencies, Paulson said during an appearance on Bloomberg Wealth with David Rubenstein Bloomberg TV.

I would describe them as a limited supply of nothing. So to the extent that there is more demand than the limited supply, the price would increase. But as the demand goes down, the price goes down. There is no intrinsic value in any of the cryptocurrencies except that there is a limited amount.

It is also worth considering how much value an asset can really have if its price can fluctuate so sharply from minute to minute, as Bitcoins did on Tuesday. According to CoinMarketCap’s analysis, the entire crypto market lost around $ 300 billion between Tuesday morning and Wednesday afternoon.

The story continues

This kind of volatility is reminiscent of the dot-com bubble of the early 2000s and the real estate crash that Paulson already took advantage of. Both were the result of empty assets attracting billions of ignorant money.

Paulson went on to say that cryptocurrencies could possibly be worthless.

Once the exuberance wears off or the cash runs dry, it will turn to zero. I would not recommend anyone to invest in cryptocurrencies, he said.

The other side of Bitcoin

Marcelo Mollaretti / Shutterstock

As Bitcoin values ​​fell on Tuesday, at least one investor bought at the bottom of the wave: the country of El Salvador.

The Bitcoin plunge on Tuesday came at a tricky time for the Central American country as it had just launched its plan to accept cryptocurrency as legal tender. Despite the uproar, El Salvador bought an additional 150 Bitcoins as prices fell on Tuesday morning.

President of El Salvador Nayib Bukele clearly sees more value in Bitcoin than Paulson. But his decision – anyone’s decision – to buy a volatile asset as its value plummets is about as risky as investing is.

Bukele tweeted that he bought his 150 new pieces at 11:15 a.m. Tuesday morning. (Twitter posts are automatically time-stamped using local time, which would make it 11:15 CST or 1:15 EST.) $ 51,000 each.

The problem is, Bitcoin ate it after the purchase. As of 4:15 p.m. Tuesday, it was selling for $ 46,927. It fell to just over $ 44,000 by early Thursday morning, before climbing back up to over $ 46,500 by 4:00 p.m.

That’s the problem with buying the dip. You never really know if it really is a trough or a trough, or an infernal pit the size of a Mariana Trench until enough time has elapsed for you to the recoil takes effect.

Enter the game

Whether you see crypto as the currency of tomorrow or a get-rich-quick scheme with the days running out, there are plenty of ways to put your money to work for you:

If you are looking to buy Bitcoin or more when its value is low, a popular app can help you do that, and it won’t cost you any fees or commissions.

If you are not comfortable with the risk involved in crypto, there is another app to help you create a personalized wallet based on your risk tolerance and personal preferences.

And if you’d rather invest in a tangible asset whose value is easier to understand, you should consider getting into farmland. As global food demand increases and the amount of arable land shrinks rapidly, farmland presents an intriguing opportunity to take advantage of rising commodity and land prices.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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