Bitcoin is ‘BS’ and most coins will ‘go under’, says Paul Krake (Cryptocurrency: BTC-USD)

Paul Krake is a former macro hedge fund manager who now delivers research to professional investors. In an interview on Srivatsan Prakash’s Market Champions podcast, he discussed three “mega-trends”: China’s economic growth, climate transformation and digitalisation. This is what he had to say about Bitcoin (BTC-USD) and crypto more broadly, with the quotes edited for clarity:

“It’s 19,000 [crypto] coins in the world. 18,980 of them perish.

Crypto is BS, complete BS. I’m the ultimate skeptic of crypto. China can never ban crypto? China banned crypto. Can not crypto be regulated? The argument “value stock”? BS. The “comparisons will come as a barter” argument? BS.

Let’s be very clear here. Fraud in this area is unacceptable in stock markets, credit markets, etc. The only reason it exists is because governments are behind the curve and they have not regulated it properly. I personally believe that coins will be regulated out of existence.

I have always been skeptical of crypto. I believe the behavior of people like Michael Saylor [CEO of MicroStrategy (MSTR), pictured] and Elon Musk, who argued that young people maximize their credit cards to buy cryptocurrencies “that could not go down”, to buy stable coins with 20% return even if they did not know where the return came from, would be criminal in any other market.

We need to separate blockchain technology from coins. You do not need tokens to implement blockchain strategies. The tokens are the pariah at the back of the innovation.

We are very lucky that there is not much systemic risk around cryptocurrency, because there are many rich people who become less rich. But there are also many young people who have lost everything by listening to people like Michael Saylor. What was his famous thing? “Plan your house to buy bitcoin.” It’s disgusting, just shameful. And I’m sure he’s not sitting with the parents of the 20-year-old who is now seeking bankruptcy because he took that advice.

I used to worry that I just sounded like an old guy, and I would have been criticized for sounding like an old guy. But I think I’m absolutely right about this. I want to challenge everyone to think about this: If you do not know where the return comes from, you are the return.

I have no view on the price of bitcoin, because I do not think it has any value. There are many things you can trade if you want to trade something with similar volatility. You can switch Salesforce or Amazon. Anthony Scaramucci often says that bitcoin is going to be like Amazon, because Amazon was once a trillion dollar company and now it’s worth three trillion dollars, and that’s where bitcoin goes. But unfortunately bitcoin does not sell books. It is not the world’s largest shuttle company. The notion that there is somehow inherent value in bitcoin is ridiculous. It is scarce value, just as it is with contemporary art and wine and property. That does not mean we need to build an entire infrastructure around it.

Do I think there is enough built-in influence so that it is another shoe to coincide with other stable coins that go under? Yes absolutely. It’s coming. Bitcoin can stay around. But will bitcoin be as relevant as the market and media said it was? Absolutely not.

Here are my three lessons for investors. First, you need to clearly define the time frame of any investment. The longer you can hold on to something, the greater the likelihood of reaching your goal because you will not be stopped by noise. Second, follow mega-themes, because mega-themes matter. Focus on topics that are truly structural. Third, never use influence. The reason people are stopped is because they use influence. People who do not use influence do not go bankrupt. You can leave money on the table, but from a risk-reward point of view, it is a far superior result. “