crypto volatility

'Black Swan' Author Slams Bitcoin, Calls It a 'Gimmick' and a Ponzi Scheme

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In a CNBC’s Squawk Box interview, Nassim Taleb, “Black Swan” author, talked about his views on Bitcoin and how to hedge risk in the current turbulent market.

He was asked about crypto assets, with a particular focus on Bitcoin, given that an increasing number of investors have been restructuring their portfolios with the new asset class.

Taleb criticized Bitcoin, describing it as a gimmick, which is too volatile to be an effective currency and not a safe hedge against inflation.

Taleb said: “Basically, there’s no connection between inflation and bitcoin. None. I mean, you can have hyperinflation and bitcoin going to zero. There’s no link between them.”

He sees Bitcoin as having characteristics of the Ponzi scheme. He said that Bitcoin is “a beautifully set up cryptographic system that is well-made but there is absolutely no reason it should be linked to anything economic.”

Taleb had once favourable views toward the leading cryptocurrency. But he told CNBC that he was fooled by it initially because he thought that Bitcoin could be used as a currency. But when he saw that the price of the cryptocurrency is very volatile and investors are using the crypto as a vehicle for speculation, he began selling off his Bitcoin and started calling it a failed currency.

Taleb advises investors who want to hedge against inflation to buy a piece of land and invest something in it. He said that investors who are worried about inflation would be better off buying property than investing in Bitcoin. He stated: “If you want to hedge against inflation, buy a piece of land. Grow, I don’t know, olives on it. You’ll have olive oil. If the price collapses, you’ll have something.”

Bitcoin Versus Real Estate

Taleb has joined the growing list of Bitcoin critics. In February, the former risk analyst and options trader announced that he was in the process of getting rid of his Bitcoin. He sees Bitcoin as a failure because of what he says that the crypto asset does not store value. He said that Bitcoin has failed as a hedge against central bank policies.

Taleb shares the same sentiment with Barbara Corcoran, the Shark Tank star, who a few days ago shared her views on cryptocurrency. Corcoran recently said that real estate is the best way for investors to get rich, not cryptocurrency.

Corcoran stated that she is into “tried-and-true” methods of making money and claims that investing in real estate is the best way to get riches.

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Cryptocurrency Has No Inherent Worth, But Creates Trading Opportunities for Businesses, Says Man Group CEO

Luke Ellis, the CEO of Man Group, the world’s largest hedge fund firm, recently stated that crypto assets have no inherent value. Still, their volatility is creating opportunities for the publicly listed hedge fund firm.

“If you look at cryptocurrencies as a whole, it is a pure trading instrument. There is no inherent worth in it whatsoever,” Ellis said in an interview with the Financial Times. “You can have an infinite number of different cryptocurrencies … Anyone can start another one any day,” Ellis added.

Ellis said that crypto tokens are just one among the 800 markets and 15,000 individual stocks that his London-based hedge fund trades. He stated that trading such assets could be good for businesses due to the crypto dramatic price swings.

“For some of the strategies we trade, we might do very well, but that doesn’t mean it’s a good thing,” he further stated.

Ellis further explained that because his hedge fund deals with cryptocurrencies does not imply that he believes that they are “an asset management product” that “deliver value.”

“We like to belong and short depending on what the models say is likely to happen to the market, and we will trade it long and short just as happily and in as big a size as market liquidity lets you trade,” he said. “We trade S&P futures all the way to sushi rice futures.”

Crypto Market Recovers

Ellis made such comments at a time when Bitcoin gained its value by almost 20% over the last week, moved its value back towards $40,000 amid speculation that Amazon could accept it as a payment method. Its price has swung wildly this year, surging almost $65,000 in April before plunging below $30,000 in May.

Bitcoin and other crypto markets have impressively recovered from recent plunging prices. The surging values could be attributed partly to reports that Amazon is contemplating adding cryptocurrency for payments. Last week, Amazon posted a new job listing, suggested that the giant e-commerce firm could be looking for ways the technology could enable modern, inexpensive, and fast payments.

The crypto price surge also comes after comments from major crypto advocates, including Elon Musk, who helped boost the technology’s momentum and price. Last week, Jack Dorsey, Twitter CEO, organised the B-word conference event, which helped demystify and destigmatise mainstream narratives about Bitcoin.

Ontario Teachers Pension Floats with FTX Trading amid Crypto Volatility

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Ontario Teachers Pension Plan (OTPP), Canada’s major professional pension fund plan company, has disclosed that its bet on FTX trading carries the lowest risk in the entire crypto asset class, Reuters reported Tuesday.

The pension fund firm further said its investment in the FTX crypto trading platform has grown well in uncertain times.

Ontario Teachers Pension Plan comments came after another Canadian pension fund company called “Caisse de Depot et Placement du Quebec” announced in August that it was writing off its entire $150 million investment in crypto lending platform Celsius Network after the lender filed for bankruptcy this year.

Ontario Teachers Pension Plan, Canada’s third-largest pension fund, oversees $227.7 billion in net assets. Last October, the pension fund ventured into the crypto business with an investment in crypto exchange FTX Trading Ltd’s $420 million funding round.

Jo Taylor, the CEO at Ontario Teachers Pension Plan, told Reuters previously: “In terms of the risk profile, it is probably the lowest risk profile you can have in that it’s everybody else is trading on your platform.

He further said the business is performing well, though he declined to comment on the size of OTPP’s investment or the equity stake.

Taylor said the investment in FTX Trading is part of its strategy to learn about the crypto business and whether it gives the right balance of risks and returns.

Betting on Crypto Despite Market Downturn

Cryptocurrencies have been under extreme pressure this year, with the price of Bitcoin crashing by more than half, dragging down other digital assets.

Despite the downturn, some large institutional investors have continued to bet on this asset class. Well-known Capital managers are still finding new ways to monetise investor interest even as trading volumes and prices for Bitcoin and other cryptos have slumped.

Early last month, a $6.8 billion Virginia pension fund company, the Fairfax County Retirement Systems, announced plans to boost its returns by investing in crypto lending markets despite a crisis in the crypto industry.

Early last month, Abrdn plc, a UK-based global investment company, entered into crypto investments by buying a stake in a regulated UK digital asset exchange Archax.

Archax provides a platform for institutional investors to trade cryptocurrencies and tokenised securities such as fractions of shares in companies. Over time, Abrdn hopes to reap “huge revenue” by giving clients access to its funds in tokenised form as well as assets that are less easily tradeable, like private debt, private equity and buildings, on its platform.

Abrdn’s investment came as BlackRock, last month, launched a spot Bitcoin trust for institutional investors through a partnership with Coinbase crypto exchange.

Last month also, Charles Schwab, the US broker and investments group, launched an exchange-traded fund (EFT) to expose investors to crypto without actually buying the currencies.

The Schwab ETF invests in listed companies that aim to profit from offering services to crypto investors or from the underlying blockchain technology.