Protea Capital Administration CEO Jean Pierre Verster stated he’s not investing in cryptocurrencies like Bitcoin as a result of it’s a speculative funding.
Verster is one in all South Africa’s high hedge fund managers who’s greatest identified for his profitable shorts of African Financial institution and Steinhoff.
Speaking to Moneyweb’s Ryk van Niekerk, Verster stated there are a number of rules to contemplate earlier than investing in cryptocurrencies.
The primary is that just because one thing elevated in worth prior to now doesn’t assure it should enhance in worth in future.
The following is that if you put money into an asset, you want to that asset to return a yield.
This yield is often generated by the funding itself. For instance, for those who make investments cash, you’re going to get curiosity on that cash. For those who put money into shares, you get dividends.
Cryptocurrencies, nonetheless, are totally different. They don’t produce something. You’ll be able to due to this fact not get curiosity or dividends from cryptocurrencies.
The one approach you may make cash from cryptocurrencies is to promote it to a different individual at the next value.
“I don’t like these kinds of investments, as a result of it makes me dependant on what the opposite individual thinks the asset is value,” Verster stated.
“An individual might imagine it’s value greater than what I paid, or lower than what I paid.”
Verster defined that he can’t logically say how a lot a sure cryptocurrency is value as a result of it’s not doable to use basic funding rules to calculate this worth.
This implies cryptocurrencies are per definition a speculative funding, the place the yield depends upon promoting it at the next value in future.
Whereas there’s nothing mistaken with speculative investments, it’s not a part of Verster’s funding technique.
Verster is in good firm. Berkshire Hathaway CEO and chairman Warren Buffett also believes Bitcoin has no underlying worth.
Bitcoin doesn’t produce earnings or dividends which, in response to Buffett, means it has no inherent worth.
“Whenever you’re shopping for non-productive belongings, all you’re relying on is the following individual goes to pay you extra as a result of they’re much more enthusiastic about one other subsequent individual coming alongside,″ Buffett stated.
He stated Bitcoin is not any totally different than Tulip mania in 1636 and predicted “with nearly certainty” it should additionally finish badly.
Berkshire Hathaway vice chairman Charlie Munger is equally scathing towards Bitcoin, calling it “nugatory, synthetic gold”.
Munger added that buying and selling cryptocurrencies are “simply dementia.”
Yale College Sterling Professor of Economics Robert Shiller shares this view, describing Bitcoin as a “outstanding social phenomenon”.
“It’s an epidemic of enthusiasm. It’s a speculative bubble. That doesn’t imply that it’ll go to zero. Speculative bubbles recur,” he stated.
Federal Reserve Chair Janet Yellen additionally warned that Bitcoin will not be a steady retailer of worth, and it doesn’t represent authorized tender.