Doug Casey on the cryptocurrency bubble

Q: Some people made fortunes with Dogecoin, a dog-themed cryptocurrency. 

Dogecoin was created as a joke, with no practical use case. Still, its market cap peaked at over $88 billion, which is roughly the recent market cap of multinational computer maker Dell Technologies. 

What is really going on here? 

Doug Casey: I understand that there are about 40,000 cryptocurrencies out there. The crypto market has turned into a mania spawned by the success of Bitcoin, which has a very real use. 

But as Nick Giambruno has pointed out, most of these things serve absolutely no useful purpose. People think they’re investing in them. They’re not even speculating in them. They’re gambling with them but don’t know it. Most cryptos have less value than Chuck E. Cheese tokens or airline frequent flyer miles. They have absolutely no value or use. To reference the old joke, they’re “trading sardines,” not “eating sardines.” They amount to play money, like that in a game of Monopoly. 

But because Dogecoin (I like to call it “doggy coin”) was mentioned and mildly promoted by a couple of celebrities, it somehow captured the imagination of gamblers and wannabe masters of the universe and got traction. People started buying and selling it for no reason other than the fact everyone else was doing it. Dogecoin became a financial meme.

Let me make a prediction. I don’t know if it’s going to be a week from now or a year from now, but the $88 billion in Dogecoin will disappear. It’s going to zero because that’s what it’s worth. The same will happen to 99.9% of other cryptos. Let me hasten to add that Bitcoin has real value as a money, however.

Stories will be told about Dogecoin, much like those about the tulip mania of the 1630s in Holland. 

~ Doug Casey, "Meme Stock Mania and Impending Financial Disaster," International Man, May 30, 2024

Michael Hsu on the resilience of the banking system during the crypto crash

The resilience of the traditional banking system to the recent events in crypto is not an accident.  Rather, it is due, at least in part, to federal bank regulators’ continued and intentional emphasis on safety and soundness and consumer protection.

~ Michael J. Hsu, Acting Comptroller of the Currency, "Crypto: A Call to Reset and Recalibrate," remarks at the DC Blockchain Summit 2022, December 7, 2022

Michael Novogratz: "anti-crypto is really bad politics"

There are 50 million owners of crypto in America, probably 25 million really passionate single-issue voters.  And so Democratic politicians had a wakeup call.  It's shocking... how many politicians are reaching out to Galaxy, to me, say, "hey, can you educate us?"  They realize they need an opinion.  Being anti-crypto is really bad politics.

~ Michael Novogratz, "Investing in Crypto with Cathie Wood and Mike Novogratz," Crypto Bahamas, 6:15 mark, May 18, 2022

Janet Yellen on how fiat currencies are different than cryptocurrencies

Stephen Colbert: Does crypto make sense to you, and on this level?  People like Ron Paul would say, after the United States dollar went off of the gold standard, under Nixon, I believe, that we're now a fiat currency.  Things are worth what they're worth because we said that it's worth something.  "It's backed by the full faith and credit of the United States," whatever that particular phrase, that term or art, may mean.  And so, is crypto, where I create a widget that spits out a coin that I declare a value and then that number of those sets a capitalization for all that crypto out there and then people get invested, so that $20 million now, people say, "oh, that's worth $100 million," and all of that is created out of nothing.  Does that make sense to you, because there is no inherent value to the actual item itself?

Janet Yellen: I've been pretty skeptical at the outset about what the value of crypto would be to the real economy.

Colbert: But because the United States has a fiat currency, is the dollar make any more sense to you than crypto does?

Yellen: Yes, the dollar makes a lot of sense to me.

Colbert: Why?

Yellen: Because it's a natonal currency, it's well-regulated by the Federal Reserve, it has a clear mandate and people who are accountable to the public and to Congress to maintain the goals of the Fed, which is maximum employment and low and stable inflation, price stability.

~ Janet Yellen, appearance on The Late Show with Stephen Colbert, 6:20 mark, December 1, 2022

Rep. Ritchie Torres on the SEC's failure to prevent the FTX collapse

If the SEC has the authority Mr. Gensler claims, why did he fail to uncover the largest crypto Ponzi scheme in US history?  One cannot have it both ways, asserting authority while avoiding accountability.

~ Rep. Ritchie Torres (D-NY), "Congressman Calls for Investigation Into Gensler, SEC’s Role in FTX Collapse," Yahoo!Finance, December 7, 2022

Jesse Powell on how Sam Bankman-Fried was in conflict with the crypto industry

Most people want good things.  They got into the space to change the world and really help people and to push crypto forward.  They're not here, first and foremost, to make money.  I think Sam saw crypto as a means to an end, and most people in this space see crypto as the end goal...  That's what we need to deliver to humanity.  So his ideas certainly were in conflict with the rest of the industry.

~ Jesse Powell, "FTX Meltdown and the Future of Crypto," Reason.com, 22:20 mark, November 16, 2022

Warren Buffett and Charlie Munger on cryptocurrencies (2018)

Warren Buffett: There's nothing being produced in the way of value from the asset.  You also have the problem that it draws in a lot of charlatans... who are trying to create various sorts of exchanges...  It's something where people who are of less-than-stellar character see an opportunity to clip people who are trying to get rich because their neighbor's getting rich buying this stuff that neither one understands.  It will come to a bad ending.  Charlie.

Charlie Munger: Well, I like cryptocurrencies a lot less than you do.  And so to me it's just dimentia.  And I think the people who are professional traders who go into cryptocurrencies, it's just disgusting.  It's like somebody else is trading turds and you decide "I can't be left out."

~ 2018 Berkshire Hathaway Annual Meeting, May 5, 2018

Jeffrey Tucker on Sam Bankman-Fried marketing FTX with social justice causes

He was a physics major who got a lot of social justice in his head and began to realize that he was looking for a new angle on how to market cryptocurrency.  And the anti-government philosophy of the usual crypto crowd of "buy bitcoin to get away from the government and secede from the Fed and have your own private money and change the world toward freedom," he went the opposite direction and realized that he could market his little business with some version of ESG and DEI and all the fashionable social justice causes.  So he came up with this idea of effective altruism.  And so he wasn't in it to make money for himself.  He was in it to support good causes and to give all of his money away.  And he drives an inexpensive car and he dresses in a shabby way, and it was all virtue signaling within the crypto space.  And this was new, actually, for the crypto world which had usually been about kind of a cowboy anarchism: "let's get away from the government to do our own thing."  He went the opposite way.  So he developed very tight relations with the left basically.

~ Jeffrey Tucker, "FTX cryptocurrency scandal is just the beginning," Will Cain Podcast, 0:15 mark, November 15, 2022

Jeffrey Tucker on the FTX scam to "play nice with regulators"

This has really introduced a complication in the culture of crypto because up to now it's been assumed that if you don't want to play ball with regulators you might be up to no good.  Now, we have every reason to think that the more willing you are to play ball with regulators, the more you might be trying to cover up what you're up to that's actually unsustainable or up to no good.

~ Jeffrey Tucker, "FTX cryptocurrency scandal is just the beginning," Will Cain Podcast, 18:15 mark, November 15, 2022

Brian Chesky on cryptocurrencies post FTX collapse

Now as far as crypto, I think that generally the analogy I'd make is like we're all in a nightclub and the lights just came on.  So suddenly I feel that we have to take a really cold hard look, have a reality check.  The technology's really interesting.  I think we have to be very careful, though, about this frenetic get-in-on-any-technology trend before it's over.  I think we ought to be very very careful about that because that's when discipline goes down.  I think people will regret decisions they make when they have this mentality that "someone else is making money, I'm not."  You really gotta always focus on fundamentals.  You always have to focus on building things for other people of value.  And if the more you learn about somthing, the less you understand it, you just gotta slow down and make sure you really know what you're doing.

~ Brian Chesky, CEO of Airbnb, interview, Bloomberg TV, November 18, 2022

Jesse Felder on the cryptocurrency craze and FTX collapse

It’s no secret how Warren Buffett has been so successful over the course of his career. In fact, he has made it priority to share all of his “secrets” with anyone willing to take the time to simply read them. The trouble is his philosophy is intolerably dry and the process of investing as he does is infinitely boring to the vast majority of people in the world. The truth is that most don’t want to succeed in the markets as much as they want to be both thrilled and agonized by them. 

The latest example of this is the cryptocurrency craze. As an investment, cryptocurrencies make very little (if any) rational sense; in fact, there’s little reason to believe they are anything more than elaborate ponzi schemes. What they do offer, however, is a strong sense of community, a feeling of intellectual superiority, hope of an easy path to financial freedom and, perhaps most importantly, the thrill and agony of wild volatility.

~ Jesse Felder, "Crypto Bros Are Getting Exactly What They Want Out Of The Market," The Felder Report, November 16, 2022

Joseph Ayoub on how the FTX cryptocurrency crash is contained

We think Bitcoin and ETH remain a too small part of the market to cause broader financial market contagion, with a total crypto market cap size of $890 billion vs $41 trillion for U.S. equities.  The FTX shortfall is still relatively small in comparison to other crypto events, such as Luna ($40 billion lost) or market cap losses in public tech names.

~ Joseph Ayoub, Citigroup digital asset analyst, "FTX's bust and crypto crash come with two silver linings," Yahoo!Finance, November 14, 2022

Marc Faber on the Reddit crowd

Concerning the Reddit crowd, which buys meme stocks, unicorns, all sorts of cryptocurrencies, NFTs, etc., I am reminded of the words of Seneca the Younger: “It is the proof of a bad cause when it is applauded by the mob.”

~ Marc Faber, The Gloom, Boom & Doom Report, January 1, 2022

Jim Rogers on cryptocurrencies

My view is that if [the cryptocurrencies] do become currencies - and the crypto people all say "we're going to be the new currency, we're going to replace government money" - if that ever starts happening, I'm sure that the governments will say, "no."  They will outlaw it or ban it or tax it.  They'll do something.  Because governments do not like to lose their control.  They do not like to lose their power.  

I can't ever imagine if the U.S. said, "ok, this is money, this is the U.S. dollar and if you want to spend money this is how you do it."  And I can't imagine the U.S. government saying, "if you want to use something else, use something else."  That's not the way governments think.  That's not the way they work.  So I suspect that if they become real currencies, governments will take action.

~ Jim Rogers, "'This Will Happen No Matter What' - Jim Rogers Interview," YouTube.com, July 26, 2021

Dogecoin creator on the cryptocurrency industry

The cryptocurrency industry leverages a network of shady business connections, bought influencers and pay-for-play media outlets to perpetuate a cult-like “get rich quick” funnel designed to extract new money from the financially desperate and naive.

~ Jackson Palmer, creator of Dogecoin as a joke, tweet, July 14, 2021

Ronald Stöferle compares gold with bitcoin

Gold is like a solid, stable, reliable SUV while bitcoin is like a Ducati Panigale, like a really, really strong motorcycle.  Once it starts raining it's getting a bit dangerous and slippery on your motorcycle.  However, I think this whole competition between gold and bitcoin is ridiculous.  In our funds we combine both.  But of course the volatility of bitcoin is tremendously higher as the track record is not 5,000 years.  So we have to manage expecations when it comes to gold.  Gold's job is not to make you rich.  I think mining stocks can make you rich, silver can perhaps make you rich, cryptos and so on.  The job of gold is to preserve your purchasing power, to protect your savings.  And I think gold is doing that job pretty well. 

~ Ronald Stöferle, "Is inflation transitory or not?," interview with Daniela Cambone of Stansberry Research, 11:10 mark, June 16, 2021

Rob Salkowitz on the collectible comic book boom

Several factors may be contributing to the [collectible comic book] boom. Though the pandemic sidelined in-person conventions and auctions where many expensive collectibles changed hands, sometimes through impulse purchases, more serious buyers had the time and focus to pursue their collections online. Rising markets, including in areas like cryptocurrency, may have lead to a “wealth effect,” encouraging people to open their wallets wider for discretionary passion purchases. Also, the practice of getting the condition of collectible comics graded by third party agencies like Certified Guarantee Corporation (CGC) has now been around for nearly two decades, painting a clearer picture of the exact number of copies of rare issues in existence and painting targets on certain high-grade issues for blue chip buyers. 

Beyond that are extrinsic factors. Collectible comics are a store of value, and one that can be easily stored and transported, making the format attractive to individuals who prefer to maintain part of their wealth discretely. There’s also the matter of momentum. Big gains in the market bring in money that’s seeking returns, irrespective of the intrinsic value of the underlying asset. Comics are ordinarily not the easiest market to crack because of the huge amount of esoteric knowledge necessary to identify what makes certain books collectible, but all bets are off if everything is going up in value in huge chunks. 

~ Rob Salkowitz, "What The Hell Is Going On In The Collectible Comics Market?," Forbes.com, June 23, 2021

A copy of Marvel Spotlight #5 (1972, Marvel Comics)
sold for $264,000 at a Heritage Auction

Randall Forsyth on fund flows going into cryptocurrencies

One would have thought that the Fed’s rapid monetary expansion [$4.2 trillion increase in M2 money supply over the past year] to help spur the economy’s recovery would have lifted gold.  But the main beneficiaries have been cryptocurrencies.  According to a J.P. Morgan report, $20 billion flowed out of gold exchange-traded funds in the most recent two quarters, while $7 billion went into Bitcoin funds. 

~  Randall Forsyth, editor of the Up & Down Wall Street column, Barron’s, April 10, 2021

Will McGough on the rise of SPACs and cryptocurrencies

There is so much $$ sloshing around now which will have its own impact.  You could argue the rise of crypto and SPACs are just vehicles to absorb all the new money.

~ Will McGough, Stadion Money Management, "One year ago stocks dropped 12% in a single day. What investors have learned since then," CNBC.com, March 16, 2021

Paul Tudor Jones: "I think we are in the first inning of bitcoin"

I think we are in the first inning of bitcoin and it’s got a long way to go...  The reason I recommended bitcoin is because it was one of the menu of inflation trades, like gold, like TIPS breakevens, like copper, like being long yield curve and I came to the conclusion that bitcoin was going to be the best inflation trade...  Bitcoin has this enormous contingence of really, really smart and sophisticated people who believe in it.  It’s like investing with Steve Jobs and Apple or investing in Google early.

~ Paul Tudor Jones, "Paul Tudor Jones says he likes bitcoin even more now, rally still in the ‘first inning’," CNBC.com, October 22, 2020