One of bitcoin’s biggest nay-sayers is having second thoughts on his stance.
Oaktree Capital Group LLC Co-Chairman Howard Marks, who once called bitcoin a “fad,” now believes it may serve as an alternative to legal tenders. Marks said the backlash to his remarks in July prompted his reconsideration. Although he’s not yet investing in it himself, he is willing to consider the arguments.
“What bitcoin partisans have told me subsequently is that bitcoin should be thought of as a currency — a medium of exchange — not an investment asset,” Marks wrote in a client memo. “So my initial bottom line is that I see no reason why bitcoin can’t be a currency. There are people (and businesses and even countries) that accept it as a legal tender.”
The turnaround is stunning, given Marks’s attitudes at the end of July. At that point, his newsletter called bitcoin “an unfounded fad,” and warned his clients to avoid them.
Marks, who is best known for calling the Internet bubble of 1999, added that cryptocurrency may be a “pyramid scheme.”
“In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it,” Marks wrote.
He compared the current state of cryptocurrency to the Dutch Tulip mania of 1637 and other infamous bubbles.
“Serious investing consists of buying things because the price is attractive relative to intrinsic value,” Marks said. “Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price.”
But in his most recent newsletter, issued Thursday, a less strident Marks reflected on why he was still gun-shy on bitcoin investing.
“Think about the fact that the price of bitcoin has risen more than 350% so far this year and 3,900 percent in the last three years,” Marks stated. “You might want to consider whether a real currency can do that, or whether speculative buying is determining bitcoin’s price.”
“Thanks to the people who took the time to educate me,” Marks concluded. “But I still don’t feel like putting my money into it, because I consider it a speculative bubble. I’m willing to be proved wrong.”
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