Another week, another round of cryptocurrency price swings and people calling the likes of bitcoin a scam.
Bitcoin (BTC-USD) broke the psychological barrier of $7,000 after travelling sideways for three weeks at about $6,000. We’ve had the US Securities and Exchange Commission reject several ETF proposals failing to pull down the price. But on the flipside, Morgan Creek Digital and Bitwise Asset Management rolled out a cryptocurrency fund.
Amid all this, one of the world’s most famous financial scam artists came out swinging and said in no uncertain terms that people are “brainwashed” into thinking cryptocurrencies are legitimate.
“I was a scammer. I had it down to science, and it’s exactly what’s happening with bitcoin,” said Jordan Belfort, who is better known as the “Wolf of Wall Street” after he spent 22 months in prison for his pump-and-dump penny stock scam. “The whole thing is so stupid, these kids have gotten themselves so brainwashed. We don’t even know how bad it really is.”
There are a few well-known people in finance who are less scathing about cryptocurrency, namely Goldman Sachs (GS) CEO Lloyd Blankfein who won’t invest in it but won’t dismiss it and legendary investor George Soros who called bitcoin a bubble but then decided to trade in the digital assets.
But it’s not just Belfort who has poured scorn on bitcoin—he’s just the latest in a long line of people in business who think it’s a scam.
Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund which manages around $160bn of clients’ money. In September last year, he said he does not believe in cryptocurrency.
“Bitcoin today you can’t make much transactions in it. You can’t spend it very easily,” Dalio said on CNBC. “It’s not an effective storehold of wealth because it has volatility to it, unlike gold. Bitcoin is a highly speculative market. Bitcoin is a bubble.”
Jamie Dimon, chairman and CEO of JPMorgan Chase (JPM) is one of the world’s most powerful people in banking. In September 2017, he said that the cryptocurrency market is “worse than tulip bulbs. It won’t end well. Someone is going to get killed. Currencies have legal support. It will blow up.”
He then added he’d “fire in a second” any JPM trader who was trading bitcoin. “It’s against our rules and they are stupid.”
But in January this year he said he “regret” calling bitcoin a fraud and added “the blockchain is real. You can have cryptodollars in yen and stuff like that. ICOs … you got to look at every one individually. The bitcoin was always to me what the governments are going to feel about bitcoin when it gets really big. And I just have a different opinion than other people.”
While some heralded this as a backpedal on his opinion, others were keen to point out that Dimon hadn’t changed his stance. In fact, this month, Dimon doubled down on how he feels about cryptos, calling it a “scam.”
Nouriel Roubini, the influential American economist who also worked as a senior adviser to Timothy Geithner (former US Treasury secretary) and is known as “Dr Doom” who doesn’t mince his words.
In May this year, he said “there is no decentralisation, it’s just bulls–t. This was a bubble … the ones who arrived late to the party are the suckers.” And if it wasn’t clear how he felt, he wrote an opinion piece about how blockchain, the tech that underpins cryptocurrency, is overhyped.
Billionaire hedge fund manager Ken Griffin of Citadel is another sceptic. He said “I don’t have a single portfolio manager who has told me we should buy crypto. What’s unfortunate is the amount of hype and the number of early investors who’ve been caught up in this hype.”
Meanwhile, Warren Buffett is a lot more scathing. In an interview with Yahoo Finance this year he said buying bitcoin is “not investing.” He said, “if you buy something like a farm, an apartment house, or an interest in a business … You can do that on a private basis … And it’s a perfectly satisfactory investment. You look at the investment itself to deliver the return to you. Now, if you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more.”
He also said in May that bitcoin is “probably rat poison squared” while his Berkshire Hathaway (BRK-A, BRK-B) vice-chairman Charlie Munger said during the group’s annual meeting that trading in cryptos is “just dementia.” Munger also called bitcoin a “noxious poison” that the government should tackle.
Elsewhere, the Nobel prize-winning professor of economics Joseph Stiglitz is just as concerned. He said last year that “bitcoin is successful only because of its potential for circumvention, lack of oversight, so it seems to me it ought to be outlawed. It doesn’t serve any socially useful function.”