BackCrypto market: Who will win the tug of war between bulls and bears?
Millionaire investor Kevin O’Leary says a bottom is usually created when there is a catastrophic event like a large player going bankrupt or somebody is in deep trouble for buying crypto on over leverage and when such an event occurs, markets will bottom out.
PremiumEven as the cryptocurrency market on Monday reclaimed the $1 trillion market cap over a dramatic fall in prices of late, there could be more pain ahead for investors in the short term, according to experts.
While millionaire investor Kevin O’Leary believes that the price of the world’s largest digital currency by market capitalization Bitcoin could quadruple once the Securities and Exchange Commission (SEC) frames regulations around the crypto sector, one of the world’s most famous short-sellers Andrew Left dubs digital assets as a solution in the search for problems and that the idea of decentralization was the stupidest thing ever.
Pains have only begun
O’Leary says a bottom is usually created when there is a catastrophic event like a large player going bankrupt or somebody is in deep trouble for buying crypto on over leverage and when such an event occurs, markets will bottom out.
“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
The venture capital investor and entrepreneur says overleverage in the crypto markets has still not been shaken off and investors can therefore expect more paid 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
The investor said regulating the sector would bring in institutional investors to asset classes like NFTs, stablecoins, and cryptos and that would bring stability.
“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 said.
O'Leary said it will take more bankruptcies and losses 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 pains being incurred by crypto companies with respect to bottomline 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. Only when the idiots are out can an industry come out stronger. We should be celebrating this purging," he said.
Rebukes crypto critics
Rebuking staunch crypto critics like 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, O'Leary said since being listed, the stocks of the company have 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, he said it will trade above what it is today, however, he was more concerned about having regulations in place so that cryptos can be bought as regulated security, like a BTC ETF.
“Once regulations are in place, the price of Bitcoin will quadruple," he said.
Citron Research founder and one of the world’s most famous short-sellers Andrew Left says 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.
BTC a collective consciousness of people
Left says neither BTC nor ETH have any real-world utility and are not accepted as 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. 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.
He adds that the only people involved in buying Bitcoin are of the same community as they see it as an asset, but it has no utility, while on the other hand, 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 that people are expecting that 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 than 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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