Popularity and a surge in the values of cryptocurrencies have drawn the eye of many around the world. And some are skeptical about its long term success. Mr. Howard Marks, billionaire investor and founder of Oaktree Capital, has termed the rise of cryptocurrencies as an unfounded fad or a pyramid scheme. He warned investors of investing in it, advising them to avoid the high-flying digital currencies.
The popular cryptocurrencies Ethereum and Bitcoin have gained more than 2300 percent and 160 percent in value this year, respictively. He likened the rise of cryptocurrencies to the tulipmania of 1637, the South Sea bubble of 1720 and the internet bubble of 1999. He mentioned that the people are just paying high prices on these digital currencies without any strong fundamentals or improvement on these assets. He cautioned investors on the optimism built around the currencies and he feels that as soon the bull market is over, these currencies will lose their value.
On investing, he said: “Serious investing consists of buying things because the price is attractive relative to intrinsic value. Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price.”
Howard Marks is known for his prescient investment memos which predicted the 2008 financial crisis and dot com bubble, and he is highly respected for his views. His views on digital currencies came on the latest Oaktree memos. Oaktree Capital has $99 billion of assets under its management.
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