Howard Marks, co-founder and co-chairman of Los Angeles-based distressed debt investor Oaktree Capital Management, took the stage during CNBC’s 8th annual conference for institutional investors named Delivering Alpha and spoke about Bitcoin and cryptocurrency investing. Needless to say, he had some pretty harsh words about the topic.
“It’s not an investment … it’s a trade,” he opened his Wednesday address with. Further on, Marks implied that people who invest into crypto are clearly speculating on the price.
“(People who invest in Bitcoin) do so not because they can specify its intrinsic benefits. Not because they can judge the intrinsic value. But only because they think it’s going up.”
Marks also mentioned a well-known investment stipulate called “greater fool theory” — a popular theory which defines the price of an asset not by its intrinsic value but rather by the expectations of the market participants. The greater fool theory applies when many investors make a questionable investment, with the assumption that they will be able to sell it later to “a greater fool”.
The investor whose company currently manages $121 billion dollars worth of assets and is himself packing a wealth of cool $2 billion feels that Bitcoin doesn’t have a long-term future:
“In the long run, I think it will be shown not to have any substance.”
This wasn’t the first time Marks spoke unfavorably about Bitcoin. The man who called the Dotcom bubble and the 2008 financial crisis spoke badly about crypto in his ‘Oaktree memos’ from 2017. The memo trashed FAANG technological stocks and additionally referred to digital stocks as “not real”.
“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.”
So are Bitcoin investors fools?
Marks does raise a couple of good points, as a lot of Bitcoin trading is speculative at the moment. However, the same can be said for any other fiat currency on the market. The value of these currencies is determined by a lot of factors, but mostly by inner trading between central banks and centralized monetary policies. Bitcoin market is the closest thing to a “free” financial market you can get at the moment, which is why so many investors flock to it. Granted, this does attract plenty of scammers and malicious players but regulation (which should help the market deal with those) is on the way.
Additionally, Bitcoin’s value stems from the fact that it’s envisioned as a decentralized, digital form of money that has the potential to unlock the world’s economy in a way that was never seen before. The “intrinsic value” is in the fact that Bitcoin and other cryptocurrencies enable fast, cheap and secure transactions and levels of liquidity that no other fiat currency can provide. Or at least they will, once proper infrastructure for that is set up. So to say that Bitcoins current price is pure speculation and to call Bitcoin investors “fools” is disingenuous at best.
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