Hamish Douglass is one of Australia’s most successful fund managers and well known for his knack of tuning out market noise, so when he says Bitcoin is “going to zero,” people take notice despite the seemingly unstoppable bullish sentiment in the crypto sphere.
The price of bitcoin fell on Monday below $30,000 for the first time in four weeks, losing 5 percent of its value in a week and breaking below a trading range that could set up a steeper price plunge.
Douglass is the chief investment officer of Magellan Financial Group Ltd, the largest public asset/fund manager on the Australian Securities Exchange (ASX), and his views are sought on everything from tech to the state of the share market.
“That’s why it’s so fascinating to see him come out so brusquely against Bitcoin,” Sebastian Bowen wrote for The Motley Fool.
Douglass blasted cryptocurrency markets as one of the greatest mass delusions in modern history and warned that asset prices artificially inflated by government and central bank stimulus could be headed for a day of reckoning.
“Cryptocurrencies, I have to say, are one of the greatest irrationalities I’ve seen in a very, very, long period of time because of the cult-like following it has behind it and the scale that is behind it,” Douglass said, according to a July 19 report in the Australian Financial Review.
Douglass, whose net worth was pegged in excess of $1 billion by Forbes in August, 2020, likened crypto and its investors to a religion and its followers.
“There are millions and millions of people participating. Some of the people, they’ve never invested before and the only bandwagon they’ve ever got on is the cryptocurrency bandwagon and it’s almost like a religion.”
Douglass labels cryptocurrencies such as bitcoin as part of the “areas of reckless speculation” that he sees on display in global markets.
Bitcoin is no different than the recent share price performances of “meme stocks” such as Tesla, GameStop and AMC Entertainment Holdings, he said, and it has “zero intrinsic value.”
Douglass said he expects to be attacked for his views on bitcoin going to zero and doesn’t care.
“I can’t tell you when that will happen by the way. It could happen shortly, it could happen quite some time into the future … I think when we look back in 20 years it will be the case study of the irrationality.”
Douglass doesn’t hold cryptocurrencies such as bitcoin in any Magellan funds, The Motley Fool reported, but he is still worried about the consequences in the broader market if investors see a collapse.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
“He warned of a contagious hit to sentiment if cryptocurrencies’ ballooning popularity creates a systemic risk, where contagion in the event of a collapse hurts broader investor confidence and upends markets,” Tom Richardson wrote for the Financial Review.
Bitcoin has been through multiple bubbles since its 2009 inception. It was designed to get around traditional banking infrastructure after the 2008 financial collapse and no one knows who invented it. A favorite among novice investors, bitcoin has seen about a 240 percent increase in share price in the past year and is up about 50-fold in five years. It was trading at $32,054 as of this writing. The No. 2 crypto, ethereum, has increased close to 170 times in value in five years to $1,966.28 per coin. Together, the top two cryptocurrencies have a combined market cap of about $1.1 trillion despite having zero intrinsic value.
Charlie Bilello, founder and CEO of Compound Capital Advisors, pointed out in a tweet that while bitcoin has crashed 54 percent from its all-time high, other cryptocurrencies have crashed harder such as ethereum, down 59 percent and dogecoin, down 77 percent. Bilello’s market insights are often featured in media outlets.
Bitcoin bull Michael Saylor weighed in at midweek, tweeting, “#Bitcoin fundamentals have never looked better.”
The MicroStrategy CEO began stockpiling bitcoin in August 2020 as a hedge against a devaluing dollar when stock in his Virginia-based enterprise software company was barely trading at $135. The MSTR price took off, hitting a peak of $1,272.94 per share on Feb. 9, before plummeting. MSTR was trading at $562.56 as of this writing. Saylor is the biggest bitcoin whale, having purchased 90,859 bitcoins at about $24,063 each for a total of $2.186 billion, according to Securities and Exchange Commission filings.
Changpeng “CZ” Zhao, the Chinese-Canadian founder and CEO of Binance, the world’s largest cryptocurrency exchange by trading volume, weighed in too. “The market likes to play with our emotions,” he tweeted.
“The best investors are comfortable having outsiders believe they are wrong for long periods of time,” tweeted Anthony Pompliano, co-founder of Morgan Creek Digital, a hedge fund that specializes in blockchain technology and digital assets.
Image credit: writerfantast / iStock
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