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Holly LaFon
Holly LaFon
Articles (10163)  | Author's Website |

George Soros From Davos: Bitcoin Is a 'Typical Bubble'

Soros predicted how the bubble will end and discussed why cryptocurrency is a misnomer

January 25, 2018 | About:

Legendary investor George Soros (Trades, Portfolio) joined a chorus of well-known investors calling bitcoin a bubble this week, making his remarks in a speech at the World Economic Forum in Davos, Switzerland Thursday.

“Cryptocurrency is a misnomer and is a typical bubble, which is always based on some kind of misunderstanding,” the financier and founder of the $26 billion Soros Fund Management said.

“Bitcoin is not a currency because a currency is supposed to be a stable store of value and the currency that can fluctuate 25% in a day can’t be used for instance to pay wages because wages drop by 25% in a day. It’s a speculation. Based on a misunderstanding,” he added.

Soros earned a reputation for making masterful calls based on macroeconomic conditions over several decades through his storied Quantum Fund, which produced average annual returns of 20% through its history. Seth Klarman (Trades, Portfolio), founder of the Baupost Group, also deemed bitcoin a bubble Thursday, calling cryptocurrencies “tulip bulbs for the digital age” in a fourth-quarter letter. Ray Dalio (Trades, Portfolio), founder of Bridgewater Associates, called the bitcoin a bubble in an interview with CNBC from the World Economic Forum in Davos on Tuesday.

Other high-profile investors have taken the opposite position. Bill Miller, chief investment officer of the Miller Value Partners hedge fund, told Consuelo Mack in a WealthTrack podcast that he had about 50% of the fund in bitcoin in December.

Soros went on to comment on blockchain technology and the crash of bitcoin during his speech:

“There’s also as very innovative blockchain technology, which can be used for positive or negative purposes. Currently it’s used mostly for tax evasion and for people and the rulers and dictatorships to build a nest egg abroad,” he said.

So recently there was a just now a … conference where instead of discussing conditions in Russia they mainly discussed bitcoin because that’s what the rulers were interested in. So this will have a big effect on the valuation of bitcoin. Normally when you have parabolic eventually it has very sharp break but in this case as long as you have got dictatorships on the rise you will have a different ending because the rulers in those countries are going to turn to bitcoin to build their nest egg abroad. So I expect instead of an abrupt break to have a rather flat top over.

But it’s nevertheless a bubble typical which is always based on a misunderstanding like the tulip mania. But the blockchain technology can be put to positive use and we use it actually in helping migrants to communicate with their families and to keep their money safe and carry it with themselves."

See George Soros (Trades, Portfolio)' portfolio here.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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