Wall Street has increasingly been catching bitcoin fever. From Fidelity to State Street to Vanguard to BlackRock, companies are finding their niche and jumping into the market to catch the bitcoin wave.
Billionaires including the likes of Elon Musk and Jack Dorsey have taken a front-row seat in blockchain development and have advocated for bitcoin’s payments use case. Companies from MicroStrategy to Square to Tesla are betting their balance sheets that the bitcoin price will rise. That’s why it’s unusual to find a high-profile doubter these days.
Nonetheless, billionaire hedge fund trader John Paulson, who is famous for predicting the sub-prime crisis of 2007/2008, has come out swinging against cryptocurrencies. In an interview with Bloomberg, Paulson, who these days is running a family office, revealed he believes cryptocurrencies are nothing more than a bubble that one day will prove to be “worthless.”
He takes aim at the supply/demand dynamic not just for bitcoin but for the broader market, saying that there is “no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.” He told Bloomberg’s David Rubenstein,
“I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing.”
According to Paulson, once the excitement dwindles or the “liquidity dries up,” whichever happens first, cryptocurrencies will “go to zero.” Incidentally, while Paulson might want to snuff out bitcoin, he is a fan of another store-of-value asset.
John Paulson is also a known gold bull and went on a buying spree of the precious metal on the heels of the U.S. housing crisis. In the Bloomberg report, Paulson warns that inflation could spiral out of control. The asset that he believes is poised to take the spotlight is gold, which is a rival investment to digital gold — bitcoin.
He believes now is the time to buy gold for the same reasons that cryptocurrency investors are flocking to bitcoin — the Fed has had the printing press turned on and the money supply is pointing toward rising inflation.
Meanwhile, bitcoin has been one of the best-performing assets of the year. The bitcoin price has generated returns of 63% year-to-date compared to the S&P 500’s 22%.
John Paulson must be bitter ~30 crypto investors and entrepreneurs have now leapfrogged him in net worth.
Betting on gold vs. Digital Gold, the Financial Internet, and the User-Owned Economy at this point is record-shattering boomer energy. pic.twitter.com/47EfLJWrp3
— Ryan Selkis (@twobitidiot) August 30, 2021
In a store of value match up for 2021 so far, the bitcoin price leaves gold in the dust, with the price of the precious metal in the doldrums for the year, down roughly 4%.