Cryptocurrencies, despite being “worthless,” will not be the next “Big Short,” according to a hedge fund manager who made billions betting on the U.S. housing market more than a decade ago.
In an interview with Carlyle Group founder David Rubenstein, John Paulson claimed that “cryptocurrencies are a bubble”. He did declare, though, that he is not betting against them. Smart short sellers need to know how much money they can gain and lose while making a bearish wager.
Paulson’s losses were limited to a few percentage points if he gambled against complex mortgage bonds and the bonds paid off. If the bond defaulted, he stood to make a 100 percent profit.
That’s not the case with Bitcoin. Bitcoin has gone from less than $12,000 a year ago, to almost $50,000 today, while Dogecoin, a crypto favourite of Tesla CEO Elon Musk, is up more than 8,000 percent over the past year.
Any short seller would be wiped out by such moves. “There is no limit to the downside,” Paulson says. “It’s too risky to short.”
Notably, cryptocurrencies, which have yet to be recognised as legal tender in any major economy, have attracted a lot of attention in recent years. Elon Musk, the founder of electric vehicle manufacturer Tesla, has recently fueled the cryptocurrency hype.
Musk’s company raised the value of Bitcoin by declaring in March that it would take Bitcoin as payment. Tesla, on the other hand, disappointed crypto enthusiasts when it reversed its decision in May.
TWITTER CLASHED ON THE OPINION MADE BY PAULSON
Meanwhile, Twitteratis and crypto lovers are in no mood to watch their favourite asset to get negativity from outside.
A user mocked him by mentioning other big investors who left him behind in terms of networth by just investing in cryptos.
Another user being sarcastic on the matter wrote a satire on his hedge fund which Paulson closed last year.
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