CRYPTO RATES A ZER0

‘Worthless’: hedgie

Hedge fund manager John Paulson made $20 billion predicting the downfall of the US housing market in 2008. Now, he’s predicting cryptocurrencies will “go to zero.”

“Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless,” Paulson told Bloomberg in an interview. “Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies.”

Despite Paulson’s bearish stance on crypto, he said the short-term volatility of the digital asset makes it too risky for him to short, or place bets against.

Ultimately the price fluctuation has to do more with the relative supply of the coins, Paulson added. “There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.”

For now, Paulson says he’s betting on another alternative asset — gold — as a safe haven.

Paulson’s hard line against crypto stands in stark contrast to many of his hedge fund colleagues who have embraced Bitcoin and other digital coins in recent months.

For some top trading shops, the volatility in the price of crypto is seen as an opportunity to make a fortune from arbitrage.

Steve Cohen’s Point72 Asset Management is working on launching crypto-focused trading funds. And Israel Englander’s Millennium Management has begun trading crypto derivatives. Hedge fund titans like Paul Tudor Jones and Alan Howard have also taken stakes in cryptocurrencies.

Of course, the likes of Englander and Cohen may be looking to make a quick buck — not exactly investing in the long-term future of digital coins.

Established institutions, meanwhile, including Goldman Sachs and Citigroup, have looked to expand their footprint in the space. Goldman allows certain clients to trade crypto through a derivative product and Citigroup is looking to begin trading cryptocurrency through a fund.

Morgan Stanley was the first bank to allow clients access to trade crypto, and now it’s even investing its own money in the speculative coin. Just days ago, the bank bought almost a quarter of a billion dollars’ worth of Grayscale Bitcoin Trust.

Even JPMorgan — whose Chief Executive Officer Jamie Dimon has referred to bitcoin as a “fraud” — is offering clients access to six cryptocurrency products.

But others fall squarely in Paulson’s camp — and are avoiding digital coins like the plague.