Mortgage Crisis Billionaire John Paulson Describes Crypto as a Bubble, Advises Not to Go There

Youri Molchan

A billionaire who bet against the US housing market during the last mortgage crisis joins the camp of those who call cryptocurrencies a bubble

Contents

  • Paulson slams crypto, praises gold as inflation hedge
  • Crypto is a “limited supply of nothing”

John Paulson, who made a fortune for himself and for investors when he short-sold subprime mortgage bonds during the 2008-09 crisis in the United States, told Bloomberg TV he doesn’t advise anyone to invest in crypto because it is just a bubble.

Paulson slams crypto, praises gold as inflation hedge

During the mortgage crisis more than 10 years ago, Paulson managed to make $20 billion shorting subprime call options. Now he is 65 and expects the current rise in USD drawdowns to lead to much higher inflation rates than everyone expects and thinks gold is a hedge against inflation at the moment.

As for cryptocurrencies, he said they will eventually prove worthless, in a conversation with Carlyle Group co-founder Rubenstein on Bloomberg TV.

After his assets fell to $9 billion in 2019 from nearly $40 billion in 2011, he turned his hedge fund Paulson & Co. Inc. into a family office and only engaged in investing , mainly managing its own funds.

After earning billions, Paulson acquired a large amount of gold and gold futures and, as some believe, turned into a “gold bug”. He believes, however, that despite the precious metal’s current decline to $1,700, it remains a good hedge in times of inflation, as it soared in 1970 when the world experienced such inflation.

He explains the value of gold by a very limited supply of investable gold.

Crypto is a “limited supply of nothing”

He called cryptocurrencies a bubble and called crypto “a limited supply of nothing.” He claims that no crypto has any intrinsic value outside of its limited quantity, as is the case with Bitcoin.

They will eventually turn out to be worthless, he thinks, as soon as the liquidity dries up or the exuberance wears off, they will drop to zero.

Previously, U.Today reported that Steve Eisman, one of the traders who shorted the US real estate market and was one of the main characters in the movie “Big Short”, prefers to stay away from Bitcoin.

In 2018, he exhibited a skeptical attitude towards crypto, saying it added no value.