Stan Druckenmiller is of the opinion that cryptocurrencies are in the midst of a speculative bubble. The same applies to many other assets.
He said this during the Boston Investment Conference held in recent days.
Summary
Crypto a speculative bubble: Stan Druckenmiller’s opinion
When asked if the bond market was in a bubble, Stan Druckenmiller replied:
“Yeah, Crypto, meme stocks, art, wine, equities. Made a lot of geniuses out of all of us the last couple of years. Everybody tries to compare this with ‘99. That was a bubble in technology and in some sense a well-deserved bubble because the market figured out 20 years ahead of time the networking effect that companies could come out of nowhere and have 2 billion customers. But it was a very very narrow bubble. This bubble is in everything. Every asset on the planet”.
The reference is to the dot-com speculative bubble. It occurred at the turn of the 1990s and 2000s, when new companies offering internet-related services proliferated. They seemed to be the future, but some projects were overpriced and failed, others lost a lot of value when the bubble burst.
The point is that it is necessary to also look at the current context and imagine the future. This is Druckenmiller’s view:
“I’m sure there is value out of there but I’m unable to see what it is, it’s really not my methodology… My North Star is every event in the world affects some security and I try to imagine the world as it is today and then try and see if there’s some kind of seismic change going on and how the world might look in 18 months. And if it does look that way, that are the securities that would be priced very differently then than they are now? I think a lot of investors live in the present, which is a disaster long term – it might work short term”.
The speculative bubble on crypto and equities
That the cryptocurrency market is in a particularly euphoric phase is shown by the prices of Bitcoin and Ethereum, which have recently reached new all-time highs.
The altcoins are also performing well. But these rises are often followed by equally sudden falls, as the case of Shiba Inu (SHIB) shows.
So-called meme stocks, such as GameStop (GME), on the other hand, are on a rollercoaster ride. When GameStop was pumped up by the Reddit group WallStreetBets, it nearly reached $400 before plummeting again. Today it is worth $212.
Risky investments
The idea is that investments should always be made with care and never get caught up in FOMO (Fear Of Missing Out).
What today seems like a good investment could soon turn into a serious loss.
The relationship between Stan Druckenmiller and Bitcoin
Stan Druckenmiller had appeared very cold towards cryptocurrencies in the past. At the height of the speculative bubble at the turn of 2017-2018 he had argued that Bitcoin would soon lose value. His prophecy had turned out to be correct, because when that bubble burst, BTC dropped and went as low as $4,000 in March 2020. Then began the bull run that seems to continue to this day.
It is no coincidence that in November 2020, when Bitcoin was approaching $20,000 again, Stan Druckenmiller revalued it arguing that it could be a better store of value than gold. He too invested in BTC when it was worth $6,500 and has publicly stated that he regretted not continuing his purchases.
