December 7, 2017, 10:00 pm EST
With all that’s going on in the world, the biggest news of the day has been Bitcoin.
People love to watch bubbles build. And then the emotion of “fear of missing out” kicks in. And this appears to be one.
Bitcoin traded above $16,000 this morning. In one “market” it traded above $18,000 (which simply means some poor soul was shown a price 11% above the real market and paid it).
As we’ve discussed, there is no way to value bitcoin. There is no intrinsic value. To this point, it has been bought by people purely on the expectation that someone will pay them more for it, at some point. So it’s speculation on human psychology.
Let’s take a look at what some of the most sophisticated and successful investors of our time think about it…
Billionaire Carl Icahn, the legendary activist investor that has the longest and best track record in the world (yes, better than Warren Buffett): “I don’t understand it… If you read history books about all of these bubbles…this is what this is.”
Billionaire Warren Buffett, the best value investor of all-time: “Stay away from it. It’s a mirage… the idea that it has some huge intrinsic value is a joke. It’s a way of transmitting money.”
Billionaire Jamie Dimon, head of one of the biggest global money center banks in the world: “It’s not a real thing. It’s a fraud.”
Billionaire Ray Dalio, founder of one of the biggest hedge funds in the world: “Bitcoin is a bubble… It’s speculative people, thinking they can sell it at a higher price…and so, it’s a bubble.”
Billionaire investor Leon Cooperman: “I have no money in bitcoin. There’s euphoria in bitcoin.”
Billionaire distressed debt and special situations investor, Marc Lasry: “I should have bought bitcoin when it was $300. I don’t understand it. It might make sense to try to participate in it, but I can’t give you any analysis as to why it makes sense or not. I think it’s real, as it coming into the mainstream.”
Billionaire hedge funder Ken Griffin: “It’s not the future of currency. I wouldn’t call it a fraud either. Bitcoin has many of the elements of the Tulip bulb mania.”
Now, these are all Wall Streeters. And they haven’t participated. But this all started as another disruptive technology venture. So what do billionaire tech investors think about it…
Billionaire Jerry Yang, founder of Yahoo: “Bitcoin as a digital currency is not quite there yet. I personally am a believer that digital currency can play a role in our society, but for now it seems to be driven by the hype of investing and getting a return, as opposed to transactions.”
Mark Cuban: He first called it a “bubble.” He now is invested in a cryptocurrency hedge fund but calls it a “Hail Mary.”
Michael Novagratz, former Wall Streeter and hedge fund manager. He once was a billionaire and may be again at this point, thanks to bitcoin: “The whole market cap of all of the cryptocurrencies is $300 billion. That’s nothing. This is global. I have a sense this can go a lot further.” He equates it to an alternative to, or replacement for, the value of holding gold – which is an $8 trillion market… “over the medium term, this thing is going to go a lot higher.” But he acknowledges it shouldn’t be more than 1% to 3% of an average persons net worth.
Now with all of this in mind, billionaire Thomas Peterffy, one of the richest men in the country and founder of the largest electronic broker in the U.S., Interactive Brokers, has warned against creating exchange traded contracts on bitcoin. He says a large move in the price could destabilize the clearing organizations (the big futures exchanges) which could destabilize the real economy.
With that, futures launch on Bitcoin on Sunday at the Chicago Mercantile Exchange. This is about to get very interesting.
It’s hard to predict the catalyst that might prick a market bubble. And there always tends to be an interconnectedness across the economy to bubbles, that aren’t clear before it’s pricked (i.e. some sort of domino effect).
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