Billionaire Fund Manager Expects Bitcoin Price To Eventually Crash to Zero

In a recent interview, Hamish Douglass, Co-Founder, Chairman and Chief Investment Officer of Magellan Financial Group, and Lead Portfolio Manager of Magellan’s Global Equity strategies, said that sooner or later the crypto bandwagon will crash.

According to his bio at the Magellan website, Hamish is a former member of the Australian government’s Financial Literacy Board, the Australian government’s Takeovers Panel, the Australian government’s Foreign Investment Review Board and the Forum of Young Global Leaders – World Economic Forum.

Magellan Financial Group (MFG), which is headquartered in Sydney is “an Australian investment manager focusing on global equities and global listed infrastructure.” MFG was co-founded in 2006 by former investment bankers Hamish Douglass and Chris Mackay. As of 31 December 2021, its assets under management (AUM) totaled approximately A$113 billion (or around $82 billion).

According to a report published yesterday (July 19) by The Australian Financial Review, the billionaire CIO of Magellan had some harsh things to say about crypto during a recent interview.

Here are a few highlights from the comments he made about cryptocurrencies:

  • “Cryptocurrencies, I have to say, are one of the greatest irrationalities I’ve seen in a very, very, long period of time because of the cult-like following it has behind it and the scale that is behind it… There are millions and millions of people participating. Some of the people, they’ve never invested before and the only bandwagon they’ve ever got on is the cryptocurrency bandwagon and it’s almost like a religion.”
  • “I can’t tell you when that will happen by the way. It could happen shortly, it could happen quite some time into the future … I think when we look back in 20 years it will be the case study of the irrationality.”

As for the equities markets, which his firm is focused on, the two main risks that concern him are COVID-19 resurgence (especially due to the delta variant of the virus) and inflation.

With regard to the former, he said:

“I guess it’s a little bit of a wake-up call in Australia with Sydney and Melbourne being back in a hard lockdown… We all thought this was over. We were about to get vaccinated. The risk is we get an escaped mutant from this virus. One that evades the vaccines … This delta one’s frightening at the speed it can spread, but the vaccines still seem to be effective against death.”

As for the recent surge in inflation, Hammish says that if it turns out to be not transitory (as, for instance, the Fed Chair Jerome Powell believes), the only solution would be higher interest rates (which could lead to recession), something that would make life difficult for all equity investors.

He also believes that there is a non-zero risk that risk-free yields on government bonds such as the U.S. 10 Year Treasury Note will increase to 3.5% in the medium term, which could lead to lower valuations for equities.

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