John Paulson Calls Cryptocurrency as Worthless Bubble in the Long-term

“A man who made one of the biggest fortunes in Wall Street history,” – John Alfred Paulson. He is an American financier who possesses assets worth billions. The leading character and the portfolio manager of the New York-based firm Paulson & Co. gave an interview on Bloomberg TV where he claimed to predict the future of cryptocurrencies as “worthless” bubbles.

Hedge Fund Manager at Paulson & Co. – John Paulson on Bloomberg TV

John Paulson 14 years ago predicted an upcoming economic crisis in the U.S. real estate market. He became sensational in 2007 as he foresaw the subprime mortgage crisis and asked investors to avoid investing in mortgage-backed securities and secured himself and others by investing in credit default swaps. 

John Paulson predicted the worst financial crisis in the US after the Great Depression. Since then people look up to him for his investment decisions. Now that credit default swaps caught everyone’s attention, Mr. Paulson seems skeptical of the rising price fluctuations in the market.

In an episode of “Bloomberg Wealth with David Rubenstein”  where he was interviewed on Bloomberg TV. He made a statement where he blatantly disregarded the financial trend. John Paulson said cryptocurrencies are bubbles that will “eventually prove to be worthless.” He also said that he wouldn’t recommend anyone to invest their funds in cryptocurrencies.

Rubenstein asked John Paulson “What about cryptocurrencies? Are you a believer?”

To this, Mr. Paulson affirmed in negative. He briefly explained, “No, I’m not. And I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing. So to the extent, there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.”

Billionaire John Paulson says cryptocurrencies in the long run are worthless bubbles, Source: Seeking Alpha

Further, he continued, “Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies.”

Based on his reply, Rubenstein further asked him, “why not put a bit short of some type on cryptocurrencies?”

To this question, he responds that “The reason we shorted subprime in size was that it was asymmetrical – shorting a bond at par that has a limited duration that trades at a 1 percent spread of Treasuries. So you can’t lose more than the spread in the duration. In crypto, there’s an unlimited downside. So even though I could be right over the long term, in the short term, I’d be wiped out. In the case of Bitcoin, it went from $5,000 to $45,000. It’s just too volatile to short.”

As the US lawmakers and the SEC work towards constructing a system where cryptocurrencies and other digital securities will be heavily regulated and controlled. John Paulson being such a popular financier who has previously foreseen and warned the US about the upcoming economic crisis might add up to the reasons to eradicate the use of cryptocurrencies.

After 24 hours of this interview, the cryptocurrencies market rate is noted to deplete. Bitcoin rates go down by -1,46% but still looms around $47,000+. There are media reports post this, that institutional investors are selling off their cryptocurrencies like Bitcoin and Ethereum.

Also Read: In 3-5 years, most NFTs will be worthless: Fred Ehrsam, co-founder of Coinbase