Even as the cryptocurrency market on Monday reclaimed the $1 trillion market cap following a dramatic fall in prices of late, there could be more pain ahead for investors in the short term, according to experts.
Crypto Bull vs. Bear: While millionaire investor Kevin O’Leary believes the price of the world’s largest digital currency by market capitalization, Bitcoin BTC/USD, could quadruple once the Securities and Exchange Commission (SEC) frames regulations around the crypto sector, one of the world’s most famous short-sellers Citron Research’s Andrew Left dubbed digital assets as a solution in search for problems and that the idea of decentralization was the “stupidest thing ever.”
O’Leary A Bull, But A Rocky Road Ahead: O’Leary said a bottom is usually created when there was a catastrophic event such as a large player going bankrupt.
“Until then, there is no bottom. Events like the collapse of companies like Voyager don’t matter. When a big catastrophic event happens, it is going to be really ugly,” he said.
Over Leverage Still Not Shaken Off: O’Leary said overleveraged companies in the crypto markets still remains a problem and investors should expect more pain ahead.
“Since there are no regulations in place, we don’t know who will blow up when. However, a positive is that when damage hits, the damage is diversified in terms of multiple countries being involved and multiple entities being in the picture. But the downsides overweigh the positives,” he said.
Institutional Investors Will Bring Stability: Regulating the sector would bring in institutional investors to asset classes such as NFTs, stablecoins and cryptos and that would bring stability, said O’Leary.
“The best thing is to start with regulating stablecoins. That will be a big encouragement for investors. Cryptos won’t recover until there are concrete policies as currently, there is no ownership with sovereign wealth managers or asset managers. Therefore, there just isn’t enough participation for it to be a real asset class,” he added.
O’Leary said it will take more bankruptcies and loss of investors’ money before the Securities and Exchange Commission takes notice and initiates regulations.
Celebrate Purging Of Bad Businesses: When asked to comment on the pain being incurred by crypto companies with respect to bottom line numbers, liquidations and bankruptcies, he said purging of bad businesses was a healthy sign as the industry is still nascent.
“What is happening with these companies is not surprising. Weak business models, management and managers that don’t understand the asset class in the first place are being purged, and the market is getting rid of idiotic management,” he said. “Only when the idiots are out can an industry come out stronger. We should be celebrating this purging.”
Crypto critics: Rebuking staunch crypto critics such as billionaires Warren Buffett and Charlie Munger, O’Leary said a new asset class is always looked down upon and that everyone tends to make a wrong decision at some point in life.
“They have great success, does not mean they are right on cryptocurrencies. The productivity, transparency, and efficiency of blockchain are immense in the long term. The other way to look at this is this — there will be unprecedented institutional capital in cryptocurrencies. The current bear market is just a blip. Extraordinary outcomes take time,” he said.
Citing an analogy of e-commerce giant Amazon.com, Inc. AMZN, O’Leary said since being listed, the stock of the company has seen 38%-50% depreciation, but good management ensures that such downsides are temporary.
Crypto Regulations Will Quadruple Bitcoin: When asked about his take on Bitcoin, O’Leary said it will trade above what it is today, but he was more concerned about having regulations in place, so cryptos can be bought as regulated security, like a Bitcoin ETF.
“Once regulations are in place, the price of Bitcoin will quadruple,” he said.
BTC, A Collective Consciousness Of People: Citron Research founder and one of the world’s most famous short sellers Andrew Left said he will not be surprised to see the world’s largest and second-largest digital currencies by market capitalization, Bitcoin (BTC) and Ethereum (ETH), at $10,000 and $200, respectively.
Left says neither Bitcoin nor Ethereum have any real-world utility and are not accepted as a means of payment by anyone.
“BTC and ETH are different. BTC is a perceived value that can stay up as long as people want to buy it, but I would not be surprised to see it come down to $10,000 levels,” said Left. “It seems like it has a future as it is already part of our collective consciousness. ETH on the other hand is supposed to have utility, and it has none. I expect that price to go right back to $200,” he said.
Left adds that the only people involved in buying Bitcoin are of the same community, as they see it as an asset. But, while it has no utility, there are companies that have real utility.
Asked to explain what real utility means to him, Left said there are companies that do things in the real world and generate profits.
Web3, A Big Illusion: The venture capitalist investor described Web3 as a big illusion and that it was only aimed at taking power away from big technology companies.
“I do not see any value in cryptocurrencies, especially altcoins. They do not have any utility. And Web3 is a big illusion aimed at taking power away from big tech companies … In a world where the Internet needs more governance, it is the stupidest thing ever that nobody controls anything [referring to decentralization] while billions of dollars are being thrown towards it,” Left said.
Digital assets are solutions in search of problems: “Assets like NFTs on the other hand are only collectibles, solutions in search of problems,” he said.
He added people expected Ethereum will have real utility once it gets an upgrade. “But once they realize there is nothing to it, they will be like — Oh Gosh!.”
Left further said that the usage of blockchain technology is marginal compared to the “hype” being generated around it and that there are several problems associated with it.
“I know companies like Oracle and IBM are using blockchain technology. However, there are several problems with it, and it is being experimented upon,” he said.
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