John Paulson, who made $20 billion predicting the 2008 financial crisis, calls cryptocurrency ‘worthless bubble’
An investor who bet $20 billion on a housing crash ahead of the 2008 financial crisis believes cryptocurrencies like Bitcoin are a “worthless bubble” and is encouraging people to invest in gold in the face of inflation ahead.
John Paulson, 65, made the comments on an episode of Bloomberg Wealth with David Rubenstein published Sunday.
He said he is avoiding the “volatile” crypto market and encouraging people to put their money in gold because it thrives in times of inflation, which could deteriorate rapidly as the country slowly recovers from last year’s COVID-19 economic shutdown. .
“We believe gold does very well in times of inflation,” he said, explaining that when prices are high, people try to put their money into something that will hold its value into the future.
John Paulson, 65, made billions of dollars betting there would be a housing crash in 2008
In a recent interview, he talked about gold, calling cryptocurrencies a ‘worthless bubble’
‘People are trying to get out of a fixed income. They are trying to get money. And the logical place to go is gold. But because the amount of money trying to get out of cash and fixed income eclipses the amount of investable gold, the imbalance between supply and demand causes gold to rise,” he added.
The consumer price index, a federal measure of the price change of goods and services, rose 5.4 percent in July from last year. The personal consumption expenditure index, a comparable index used by the Federal Reserve, rose 4.2 percent in July — the fastest pace since 1991, according to the Federal Reserve. New York Times.
Both indices point to rising inflation or rising prices.
Meanwhile, the Federal Reserve is keeping interest rates near zero to encourage borrowing and investing as the country slowly climbs out of the pandemic, and will likely keep them there until 2023.
“The sectors hardest hit by the pandemic have shown improvement but have not fully recovered,” the Federal Reserve said in a statement last month.
“Inflation has risen, largely due to transient factors. General financial conditions remain accommodative, partly as a result of policies to support the economy and the flow of credit to US households and businesses.”
Paulson suggested that federal intervention, such as stimulus measures and increased unemployment support, boosted the amount of money people have, contributing to the current rate of inflation and making gold a more attractive investment.
‘The money supply has increased by about 25 percent last year and the best indicator of inflation is the money supply. So I think we have inflation much higher than current expectations.’
On the other hand, cryptocurrencies such as Bitcoin and Ethereum, which promise independence from governments and major financial institutions, “will eventually prove worthless,” Paulson said.
Paulson said cryptos like Bitcoin and Ethereum will ‘eventually prove worthless’
He called the digital currency “volatile.” Above is a chart showing the price of Bitcoin over a three-month period this year
“Once the exuberance wears off or the liquidity dries up, they go to zero. I would not advise anyone to invest in cryptocurrencies,” he said.
He added: ‘I would describe them as a limited supply of nothing. So if there is more demand than the limited supply, the price would rise. But as demand falls, the price would fall. There is no intrinsic value to any of the cryptocurrencies, except that there is a limited number.”
Between 2007 and 2009, Paulson’s company made $20 billion, personally bringing him about $4 billion. He did it by buying $1 billion worth of insurance on risky mortgages in 2006, basically betting that a housing market would come, according to the Wall Street Journal.
In general, Bitcoin prices have been steadily rising since its inception in 2009. One Bitcoin was worth $123 in May 2013, rising to $1,179 in February 2017 and to $48,000 today.
The price of the digital currency has been known to fluctuate dramatically, but it drops to $258 in a 24-hour period ending at 12:24 PM on Monday.
Paulson’s company made $20 billion after buying $1 billion worth of insurance against high-risk mortgages. Above, traders on the New York Mercantile Exchange in September 2008
The 2008 crisis left many Americans homeless and unemployed and led to tax cuts, bailouts and other measures to revive the economy.
In 2008, Paulson made a fortune betting that financial companies tied to the risky loans would crash.
He quickly became one of the biggest beneficiaries of a financial crisis that left many Americans unemployed and homeless.
The Queens, New York native, quit the hedge fund game last year and turned it into a family investment affair after several losses drained his net worth to $9 billion in 2019, from a peak of $38 billion in 2011.