It’s now over 14 years since John Paulson shorted the housing bubble, bet against it, and made a neat $20 billion fortune for himself and other investors back in 2008. So naturally, everyone in the industry is curious about his next big trade.
It’s certainly not Cryptocurrency.
Now 65 years old, Paulson considers crypto to be a bubble that would “eventually prove to be worthless.” His advice for anyone considering investing in one of the hottest investments of this era is; don’t do it. Speaking in a recent interview on Bloomberg, Paulson wouldn’t recommend anyone to invest in cryptocurrencies,
Instead, Go for Gold
Paulson is wary of cryptocurrencies and refers to them as “a limited supply of nothing.” According to him, their intrinsic value seems to be in their limited amounts and the fact that there’s more demand than supply. Therefore, if the demand goes down, they will ultimately prove to be worthless.
Instead, he recommends investing in gold and that investors shouldn’t hesitate to buy it, even at its current price of around $1700 an ounce. Paulson, who has been referred to as a ‘gold bug’ by some, firmly believes the limited amount of investible gold in the market makes it the most logical go-to investment.
Why Gold?
Some investors will, of course, not agree with Paulson’s harsh criticism of digital assets. Their first point of reference would be the fact that they have outperformed gold by significant margins in recent years.
Paulson has run into difficulties in recent years and has had to return a great deal of his investors’ cash and turn his hedge fund firm into a private investment firm. The Wall Street Journal announced in March 2020 that Paulson was the latest ‘investment star’ who had to return billions of investors’ money amid the increasing challenges facing the hedge fund industry.
However, Paulson is incredibly bullish about gold. He considers it an excellent investment. Why? Because the supply and demand imbalance between the total amount of investible gold and the total amount of financial assets will always increase its price. This, he says, is the reason gold often “goes parabolic” and that there will always be a limited amount.
From an investment perspective, Paulson argues that digital assets such as cryptocurrencies are too risky an investment. They have unlimited downside and, citing examples such as Bitcoin, too volatile to short.
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