‘Big Short’ investor Michael Burry says he doesn’t hate bitcoin but thinks its ‘long-term future is tenuous’

Michael Burry Getty
  • Michael Burry sees central governments as bitcoin’s biggest adversaries.
  • The investor said in a tweet that “legally violent, heartless central governments with #lifeblood interest in monopolies on currencies” won’t allow bitcoin to remain decentralized.
  • Burry said he does not hate bitcoin, but he sees the digital asset’s “long-term future” as “tenuous.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Government regulation is what bitcoin bulls should fear more than anything, according to legendary investor Michael Burry.

In a Sunday tweet, the Scion Asset Management chief said while he doesn’t hate bitcoin and isn’t short the digital currency, he sees its “long-term future” as “tenuous.”

In his tweet, Burry said “legally violent, heartless centralized governments with #lifeblood interests in monopolies on currencies” won’t allow bitcoin to thrive and remain decentralized in the long-term.

Still, the Big Short investor noted “in the short-run anything is possible” for the digital currency. Bitcoin surpassed the $1 trillion market capitalization milestone last week before retracing gains on Monday. The cryptocurrency returned over 300% to investors in 2020 alone.

Burry is best known for his billion-dollar bet on a US housing market crash before the 2007-08 financial crisis which was immortalized in “The Big Short” by Michael Lewis, and a subsequent movie by the same name.

The Sunday tweet from Burry comes as he continues to sound alarms over a potential stock market collapse.

Burry claimed the “market is dancing on a knife’s edge” in a recent series of Tweets that argued rampant speculation has caused a huge bubble in the equity market.

Even worse for bitcoin investors, Burry doesn’t see gold or the digital asset as a way to prevent losses in the event of an “inflationary crisis” following a market crash. 

“In an inflationary crisis, governments will move to squash competitors in the currency arena. $BTC #gold,” the investor said.

Burry recently tweeted a string of quotes discussing Germany’s path to hyperinflation in the 1920s.

He sees America’s current trajectory as replay of the post-World War I mishaps that eventually led to a 320% monthly inflation rate in the country.

If Burry is right again, investors won’t be able to argue that they weren’t warned.

“People say I didn’t warn last time,” Burry said in a tweet. “I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.”

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Bitcoin on track for biggest weekly fall since September as Janet Yellen and ‘double spend’ report spook speculators

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Bitcoin has had a volatile couple of weeks after hitting a record high of close to $42,000

The bitcoin price was set for its biggest one-week fall since September on Saturday morning, having slipped around 10% since Monday.

Bitcoin – which hit an all-time high of close to $42,000 on January 8 – tumbled to around $28,000 on Thursday evening.

But it recovered to around $32,170 by Saturday morning. That means it was down about 10% since Monday, putting it on course for the the biggest weekly drop since declining by 12% in September, according to TradingView data.

Should the price tumble back towards the lows seen in the Asia session, the bitcoin price could be heading for its worst week since it crashed 33% in March 2020.

Read More: We spoke to Winklevoss-backed crypto platform Gemini about bitcoin, how to use stable coins, and why regulation won’t kill the boom in digital currencies

Bitcoin came under selling pressure this week after Janet Yellen, Joe Biden’s pick for Treasury secretary, suggested the use of cryptocurrencies should be “curtailed” because they were used mainly for “illicit financing”.

Many analysts put bitcoin’s overnight slide on Thursday down to a report by BitMEX Research that suggested a flaw called “double spend” – when someone is able to spend the same coin twice – had occurred in the cryptocurrency’s blockchain.

Yet the report was widely rejected in the cryptocurrency community. Analysts said that what BitMEX initially thought could be a “double spend” was in fact a regular occurrence in the blockchain system that underlies Bitcoin.

Cryptocurrency expert Andreas Antonopoulos said on Twitter: “There was a chain re-organization in the Bitcoin blockchain. This is a common occurrence that is part of Bitcoin’s normal operation.”

He added: “All of this is normal. A 1-block reorganization happens every couple of weeks.”

Bitcoin has soared in recent months, rising from a 2020 low of less than $4,000 in March to more than $41,000 earlier this month. Overall, it is up around 280% in the last year.

Fellow cryptocurrency Ethereum was around 1% higher on Saturday morning to $1,256. That was shy of an all-time high of more than $1,430 hit last week.

Advocates say cryptocurrencies are fast becoming safe-haven assets that can protect investors’ portfolios against the risk of inflation and currency devaluation triggered by the unprecedented fiscal and monetary stimulus unleashed during the coronavirus pandemic.

They point to a growing number of institutional investors showing interest in Bitcoin. BlackRock on Wednesday moved to add Bitcoin futures to two of its funds, highlighting the demand for the currency.

Yet regulators and critics have warned that cryptocurrencies like Bitcoin have no fundamental factors driving their value and are highly volatile, meaning investors could “lose all their money”.

Read More: The chief investment strategist at a $9.6 billion volatility-focused money manager breaks down why the stock market is poised to get more chaotic in 2021 – and shares how investors can take advantage of it

Nonetheless, market interest has picked up sharply in recent months. Some analysts said the recent fall could be an opportunity.

“The current correction is a blessing for those who have missed the rally during which the cryptocurrency doubled from its previous high, a move from $20,000 to $40,000,” said Naeem Aslam, chief market analyst at Avatrade.

Craig Erlam, senior market analyst at currency platform Oanda, said: “We may see a small rebound now, just as we did earlier this month.

“But the price action we’ve seen this month suggests there’s some nervousness around these levels. It will certainly be an interesting watch over the coming weeks.”

This article was updated to highlight that the report that suggested a “double spend” occurred was widely rejected in the Bitcoin community.

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Bitcoin falls 11% after report suggests a critical flaw in the cryptocurrency called ‘double spend’ may have occurred

NYSE trader worried
  • Bitcoin fell as much as 11% on Thursday after a report from BitMEX Research suggested that a critical flaw called “double spend” had occurred in the Bitcoin blockchain.
  • Double spend is a highly feared scenario where a user is able to spend their bitcoins more than once.
  • Ultimately, a double-spend event did not actually occur, according to the CTO of Bitfinex.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bitcoin fell as much as 11% on Thursday, hitting its lowest level in nearly three weeks, as the popular cryptocurrency was hit with a double whammy that jolted faith in its user base.

First, Janet Yellen, President Joe Biden’s nominee for treasury secretary, suggested during her confirmation hearing on Tuesday that lawmakers “curtail” the use of Bitcoin because of its use in illicit activities.

And second, a debunked report from BitMEX Research on Wednesday suggested that a critical flaw called “double spend” had occurred in the Bitcoin blockchain.

Double spend is when someone is able to spend the same bitcoin twice. It is a feared and dire scenario for the digital asset, and the blockchain was thought to have solved the issue when Satoshi Nakamoto published the Bitcoin white paper in 2009.

Early attempts to launch a digital cash system were ultimately halted by vulnerabilities that could have enabled double spending and undermined faith in the system.

BitMEX Research tweeted that “it appears as if a small double spend of around 0.00062063 BTC ($21) was detected.”

Read more: GOLDMAN SACHS: These 22 stocks still haven’t recovered to pre-pandemic levels – and are set to explode amid higher earnings in 2021 as the economy recovers

BitMEX later said it appeared that the double spend was actually an RBF transaction, which is when an unconfirmed bitcoin transaction is replaced with a new transfer paying a higher fee. But BitMEX’s Fork Monitor said that “no (RBF) fee bumps have been detected.”

BitMEX said in another tweet: “A transaction in the losing chain sent 0.00062063 BTC to the address 1D6aebVY5DbS1v7rNTnX2xeYcfWM3os1va, and a transaction in the winning chain which spent the same inputs only sent 0.00014499 BTC to this address.”

Ultimately, the double-spend event did not occur, according to Bitfinex CTO Paolo Ardoino. In an e-mail to Insider, Ardoino explained, “In fact, what happened is that two blocks were mined simultaneously. As a consequence, there was a chain reorganization, which did not result in double-spending.”

Meanwhile, institutional investors continue to gain exposure to bitcoin. Filings with the Securities and Exchange Commission on Wednesday said BlackRock had enabled two of its mutual funds to invest in the cryptocurrency.

Read more: We spoke to the Winklevoss-backed crypto platform Gemini about Bitcoin, how to use stable coins, and why regulation won’t kill the boom in digital currencies

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Bitcoin has now replaced tech stocks as the most crowded trade, according to a BofA fund manager survey

Bitcoin
Bitcoin.


A Bank of America fund manager survey reveals that a significant number of investors believe bitcoin is the most crowded investment trade. 

In a January survey of portfolio managers, strategists, and chief investment officers who together manage over $561 billion, 36% of investors surveyed said bitcoin is the most crowded trade. “Long tech” had previously held that title since October 2019. 

The survey emphasizes the extreme bullishness around the cryptocurrency as it soars past new records and attracts new investors from the retail and institutional sides of the market. 

The last time bitcoin was deemed the most crowded trade was in December 2017, when it peaked at $20,000 but spiraled downward in the following year. 

Read more: We spoke to crypto platform Gemini, which is backed by the Winklevoss twins, about Bitcoin, how to use stable coins and why regulation won’t kill the boom in digital currencies

“Long tech” came in second place, with 31% of investors considering it the most crowded trade. Meanwhile 23% said short the US dollar was the most crowded, and 4% said long corporate bonds. 

The survey comes as the cryptocurrency sheds off some of its gains from the beginning of 2021. Bitcoin sank as low as $33,412.72 on Wednesday, after climbing to a record of nearly $42,000 earlier this month. On Tuesday, Biden’s pick for Treasury Secretary Janet Yellen suggested that lawmakers “curtail” the use of cryptocurrencies such as bitcoin over concerns that they are “mainly” used for illegal activities.

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3 reasons why bitcoin has doubled in less than a month – and why experts think it won’t repeat its 2017 crash

Bitcoin
  • Bitcoin has more than doubled in less than a month, leaving analysts and investors stunned and concerned about a possible market bubble.
  • In many ways the token’s rally in recent months is crucially different than the surge seen three years ago, as buyers now range from casual day traders to fund managers handling billions of dollars in assets.
  • Easy monetary conditions and trillions of dollars in fiscal stimulus have led some investors to view the token as a new inflation hedge.
  • Detailed below are the factors driving bitcoin higher, and why experts don’t think the cryptocurrency will crash as it did in 2017.
  • Visit the Business Insider homepage for more stories.

It took nearly 11 years for bitcoin to reach $20,000 per coin for the first time in 2017. Just 22 days later, the world’s most popular cryptocurrency has surged another $20,000, and its momentum is so far holding strong.

Bitcoin’s rapid climb back in 2017 was swiftly followed by sell-offs that erased the bulk of its quickly earned gains. But no such trend has emerged this time around, and experts say a combination of factors fueled the token’s surge through 2020 and will continue to boost bitcoin in the new year.

Detailed below are three reasons behind bitcoin’s price spike, and a discussion of why it’s unlikely to suffer a crash similar to that seen two years ago.

(1) Fear of missing out

While passionate retail investors powered bitcoin’s 2017 rally, public companies sparked the token’s latest climb. MicroStrategy started a chain reaction when it bought $425 million worth of bitcoin in August and September, Jimmy Nguyen, president of the Bitcoin Association, told Insider. The move opened the door for other public companies to view bitcoin as a viable reserve asset.

Square followed in October with its own $50 million purchase. Still, it wasn’t until PayPal adopted bitcoin that prices began to rocket higher. The company announced on October 21 that it would allow its hundreds of millions of users to buy, sell, and hold bitcoin. The token leaped to its highest level since July 2019 as investors saw the adoption as a key step forward for bitcoin’s widespread use.

Read more: The CIO of a $500 million crypto asset manager breaks down 5 ways of valuing bitcoin and deciding whether to own it after the digital asset breached $40,000 for the first time

“People are seeing a move to it as a reserve asset, knowing there’s a limited supply of Bitcoin, and saying, ‘okay, I want my piece of it before it goes too high in price,” Nguyen said.

The subsequent rise in bitcoin prices then pulled institutional investors into the fray. Fund managers who previously balked at the token and its violent price swings feared they were missing out on strong returns and began shifting some cash into the cryptocurrency.

Institutional investors have since pushed billions of dollars into the cryptocurrency market. Their involvement has played the biggest part in the token’s meteoric rise through the end of 2020, according to Douglas Borthwick, chief marketing officer at digital-asset trading platform INX.

“If you don’t have something in your portfolio that’s performing well, then you’re not going to perform well. People are going to leave your fund,” Borthwick told Insider. “You’ve got larger and larger position sizes chasing a smaller and smaller number of bitcoin in circulation.”

(2) Demand for inflation hedges

Bitcoin may first seem completely disconnected from the coronavirus pandemic, but the health crisis’ fallout has played a critical role in supporting token prices. Governments around the world passed several trillion dollars worth of fiscal stimulus to pad against the pandemic’s economic damage.

The influx of fresh currency and easy monetary conditions boosted the case for bitcoin as a hedge against inflation, JPMorgan analyst Nikolaos Panigirtzoglou said in November. A limited supply of 21 million tokens and insulation from policy decisions saw the token serve as an alternative to gold and other hedge assets.

“That money printing has meant that everyone in the world has been searching for hard assets to invest in, something that isn’t going up in terms of supply,” Borthwick said.

Read more: A growth-fund manager who’s beaten 96% of his peers over the past 5 years shares 6 stocks he sees ‘dominating their space’ for the next 5 to 10 years – including 2 he thinks could grow 100%

(3) Increase legitimacy

Companies and institutional investors warming up to bitcoin has given legitimacy to an asset recently known more for its murky uses than its investment potential. During the token’s 2017 rally, those less familiar with cryptocurrencies associated them with “nefarious activities,” Borthwick said.

PayPal’s adoption and the influx of institutional funds lend bitcoin new legitimacy and interest among retail investors, Borthwick added. And just yesterday, the US Office of the Comptroller of the Currency said national banks can use blockchain networks and stablecoins for payments, further legitimizing digital currencies.

“The more big names get involved in the space and the more regulators start writing regulations about it, the more it becomes a mainstream asset,” Borthwick said.

Curiosity among everyday investors exploded through the end of last year. Global search interest for bitcoin more than tripled from early October to early January, according to Google Trends data. Celebrities ranging from actress Maisie Williams to rapper Meek Mill have tweeted about entering the cryptocurrency market. In a matter of months, the crowd pushing cash into bitcoin has evolved from fund managers and crypto-fanatics to practically everybody else, Borthwick said.

“There’s an absolute land rush to get invested in the crypto space,” he added. “It’s no longer friends and family and old friends from college.”

Read more: BANK OF AMERICA: Buy these 8 US stocks poised to soar in the first quarter of 2021- and avoid these 2 at all costs

What’s ahead for the red-hot cryptocurrency

Bitcoin’s rapid doubling has naturally prompted some investors to deem the token a bubble. JPMorgan said Monday that the token’s rally moves it “into more challenging territory,” and that a continued climb at its current pace would likely “prove unsustainable.”

The market very well may be “prone to a sort of correction,” but it’s unlikely to resemble that seen three years ago, Nguyen said. Institutional investors are poised to maintain their bitcoin positions for fear of prematurely selling and missing out on additional returns.

Growing interest in blockchain and cryptocurrencies also protects prices from returning to the recent lows, Borthwick said

“What you’re talking about here is the adoption of something by everybody in the world over a very short period of time,” he said. “When you talk about a new technology, I don’t think there ever is such a thing as a top.”

Now read more markets coverage from Markets Insider and Business Insider:

Deutsche Bank says buy these 14 beaten-down financial stocks poised for a bullish recovery from 2020’s ‘savage sell-off’ – including one that could rally 30%

US payrolls post surprise drop of 140,000 in December, the first decline since April as America’s labor-market struggles continue

The S&P 500 will climb another 10% as the Democrat-controlled government passes new stimulus, Credit Suisse says

Read the original article on Business Insider

Bitcoin is irrelevant to financial markets and investors ‘are going to weep’ if regulators come down hard on crypto, says Kevin O’Leary

kevin o'leary
  • Kevin O’Leary told CNBC on Thursday bitcoin is irrelevant to financial markets and at risk of regulation. 
  • His comments come as an increasing number of institutions like Guggenheim and SkyBridge capital invest millions into the cryptocurrency, driving a rally of over 200% in 2020. 
  • “I’m waiting for the day that one of these regulators comes down hard on bitcoin. Grown men are going to weep when that happens. You’ll never see a loss of capital like that ever in your life. It will be brutal,” he said. 
  • Treasury Secretary Steven Mnuchin is proposing new regulation that would require certain cryptocurrency traders to provide more information about their identities and cryptocurrency transactions.
  • View Business Insider’s homepage for more stories.

Kevin O’Leary told CNBC on Thursday that bitcoin is irrelevant to financial markets and too at risk of regulations to be taken seriously by institutional investors.

“Is this a nothing burger? It’s not even a single cell amoeba,” the O’Shares chairman said,
“I love to talk about it, it’s fun to watch it go up and down, but during the day, when the bell rings, I don’t talk to anybody that’s worried about this. They do not put capital to work in bitcoin.”

His comments come as more institutional players are piling in, validating bitcoin’s legitimacy as a store of value and hedge against inflation. Earlier this week, SkyBridge Capital invested $25 million into a new bitcoin fund, while last month, Guggenheim filed to reserve the right for 10% of its $5.3 billion Macro Opportunities Fund to invest in the Grayscale Bitcoin Trust.

Read more: Renowned strategist Tom Lee says to buy these 29 stocks that were ravaged by the pandemic but now poised to boom as the world reopens – and they’re all top-rated by 3 different investing strategies

O’Leary said that the concept of a digital currency will likely come to fruition in the future, but investors should be careful glorifying bitcoin while it has yet to fulfill a defined role in financial markets and while it could still be regulated. This year, bitcoin has skyrocketed over 200%, and many crypto bulls are forecasting an explosion of growth in 2021. 

Though regulations could be coming for the popular token. Treasury Secretary Steven Mnuchin is proposing new rules that would require certain cryptocurrency traders to provide more information about their identities and cryptocurrency transactions. This doesn’t appear to have scared off various institutional investors, but O’Leary, who said he has $52.77 in a crypto wallet, is more worried.

“I’m waiting for the day that one of these regulators comes down hard on bitcoin. Grown men are going to weep when that happens. You’ll never see a loss of capital like that ever in your life. It will be brutal,” he said. 

O’Leary added: “This whole market, even if Bitcoin were to go up, another 2000% is completely irrelevant to the institutional client.”

Read more: ‘I don’t see this ending well’: A 47-year market vet breaks down why stocks are a ‘few months’ away from a 75% crash – and says gold will surge to $10,000 because of a tidal wave of inflation

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