Jim Chanos, the investment manager who famously predicted the collapse of Enron Corp, has poured scorn on digital currencies in another disparaging assessment from the world of traditional finance.
Talking to the Institute for New Economic Thinking, the famous short-seller gave a very pessimistic analysis of the cryptocurrency market - arguing that the industry displays a lot of the hallmarks of the dot-com bull market and crash of the 1990s.
Expanding the analogy, the veteran investor argued that the hype surrounding bitcoin and other cryptocurrencies in the last year very closely matches his definition of a “fraud cycle” where investors become increasingly reckless and “get a bit jiggy with their capital.”
Moreover, Chanos is very sceptical of the potential for digital currencies to act as a last resort in the event of a crisis. Unlike fiat currency where governments are able to step in a crisis as lenders, he believes that cryptocurrencies are a “libertarian fantasy,” adding that:
“For those who believe that you need to own digital currency as a store of value in the worst-case scenario, that’s exactly the case in which a digital currency will work the least. The last thing I’d want to own is Bitcoin if the grid goes down.”
An Industry Divided
Traditional finance appears to be strongly divided with respect to their views on the emerging cryptocurrency industry.
While crypto naysayers such as Warren Buffet and economist Nouriel Roubini have famously of late made some lurid remarks about bitcoin, other moves from industry leaders such as Goldman Sachs have been markedly different - with the investment bank recently announcing a bitcoin trading desk.
Chanos' latest statements about the industry will no doubt be one day seen as uniquely prescient or fantastically wrong.