Still Thinking Bitcoin Is a Madoff-Style Ponzi Scheme? Listen to the World’s Best Hedge Fund Managers Investing in Bitcoin
This will probably strengthen your convictions if need be.
At the end of the year, at Christmas time, it seems that the Financial Times needed content. In those moments when all journalists want to take their vacations, the Financial Times turns to guest writers. What better way to create a buzz than to write an article falsely attacking Bitcoin.
This is what was done on December 22, 2021.
Here is the title of this Financial Times article: “Why Bitcoin is worse than a Madoff-style Ponzi scheme”. A clickbait headline that has achieved its goal: to make some noise. If you want to make noise, nothing is better than falsely attacking Bitcoin with arguments that have been proven wrong several times in the past.
This is the case with this attack on Bitcoin as a Ponzi scheme. In the article, the guest writer, Robert McCauley, goes even further by saying that Bitcoin is worse than a Ponzi scheme. Indeed, since Bitcoin has no leader, there is no one to sue to harm Bitcoin.
Bravo Robert, you have understood the whole point of Bitcoin: a monetary system without any leader and therefore unstoppable.
Even the World Bank said in 2014 that Bitcoin was not a Ponzi Scheme
Since its inception, Bitcoin has very often been accused of being a Ponzi Scheme by its critics. On the last day of the year 2019, Tendayi Kapfidze, the chief economist at America’s largest online lending marketplace LendingTree, wanted to make a name for himself by declaring:
“I am convinced that Bitcoin is nothing more than a pyramid scheme. You only make money based on people who enter after you.”
This attack was already nothing new, as it frequently occurs when economists or politicians wish to criticize Bitcoin and find no real argument against it. To put an end to this myth now, I suggest you refer to the detailed report on Ponzi Schemes published in 2014 by the World Bank.
This report was written by the highly respected Kaushik Basu, former Chief Economist of the World Bank but also Professor of Economics at Cornell University.
In his report, Kaushik Basu says in particular:
“Contrary to a widely-held opinion, Bitcoin is not a deliberate Ponzi. And there is little to learn by treating it as such. The main value of Bitcoin may, in retrospect, turn out to be the lessons it offers to central banks on the prospects of electronic currency, and on how to enhance efficiency and cut transactions cost.”
— Kaushik Basu
I think there’s nothing more to add. Just read what Kaushik Basu says in his report, and even more so what he demonstrates. The people who continue to think that Bitcoin is a Ponzi Scheme in 2021 are misinformed people with whom you should not waste your time.
Nevertheless, I will go even further.
I often tell you not to blindly follow what others do and to make your own opinion. This is the only attitude that will allow you to never have regrets in life. To make your own opinion, you should incorporate into your thought process the fact that the world's best hedge fund managers have invested directly in Bitcoin or Bitcoin-related companies in recent months.
I'll give you examples of five of them in the following, but the list is far from exhaustive. Each time, it's pretty much the same thing. More or less critical opponents of Bitcoin who finally open their eyes to the reality that Bitcoin is a true monetary revolution that is here to stay. Rather than fight unnecessarily, these brilliant investors decide to embrace the Bitcoin revolution.
Paul Tudor Jones
Of all the most famous hedge fund managers, Paul Tudor Jones was the first to have the courage to come out of the woodwork. In May of 2020, Paul Tudor Jones took a public stand in favor of Bitcoin over gold as a hedge against the great monetary inflation to come. In the race for profits, Paul Tudor Jones then explains that Bitcoin will be the big winner.
In the face of this war on inflation, Bitcoin still won by a wide margin in 2021, giving even more weight to Paul Tudor Jones' stance at a time when its price was under $10K.
In October 2021, Paul Tudor Jones would reiterate his confidence in Bitcoin:
“Bitcoin is my preferred hedge against inflation over gold at the moment. Clearly, it's winning the race against gold at the moment.”
While Paul Tudor Jones prefers to invest directly in Bitcoin to take the power, he explains that ETFs will allow more people to come and profit from Bitcoin in the future. Not everyone is made to secure their wealth in his eyes. For him, it's only a matter of time before the SEC eventually adopts an ETF based on the Bitcoin spot market.
To take full control of Bitcoin, you must take possession of the associated private keys. That means buying your BTC outright. However, Paul Tudor Jones' opinion is valid. Many investors will prefer to stand behind a third party who will ensure the security of their Bitcoin for them. A way to take advantage of Bitcoin's hedge against inflation, but not to protect against censorship.
This is the current reality in the Bitcoin world. Many people still don't see that Bitcoin is an essential weapon for taking full power over the fruits of one's labor. This will come in the future probably, but it will take more time.
Stanley Druckenmiller's change in attitude toward Bitcoin is even more interesting to study. Paul Tudor Jones never showed hostility to Bitcoin. Stanley Druckenmiller was a little more critical against Bitcoin. However, Stanley Druckenmiller has always struck me as someone who makes sense. Especially when he said that:
“Bitcoin is like anything else: it's worth what people are willing to pay for it.”
Like me and the Bitcoiners, Stanley Druckenmiller is a proponent of the subjective conception of value theory. Bitcoin is valuable to the 130 million people who are willing to pay that price to own it.
Stanley Druckenmiller initially saw Bitcoin as a solution to a problem that did not exist. The need for people to have hard money available to them was not apparent to him.
And then the COVID-19 pandemic came along. The response of the American government with the stimulus of several trillion dollars and the attitude of the Fed, which printed American dollars out of thin air in unlimited quantities, made him aware of the existence of this problem:
“I thought Bitcoin was solution in search of a problem. I found the problem: When we did the CARES act and Chairman Powell started crossing all sorts of red lines in terms of what the Fed would do and wouldn’t do. The problem was Jay Powell and the world’s central bankers going nuts and making fiat money even more questionable than it already has been when I used to own gold.”
Stanley Druckenmiller then became so interested in Bitcoin that he became a supporter of it:
“Bitcoin has enhanced hard sound money properties that gold has but without any of the flaws.”
What finally convinced Stanley Druckenmiller of Bitcoin's incredible potential for the future was the strength of conviction of Bitcoiners in March 2020 during the liquidity crisis:
“Then the second thing that happened is I got a call from Paul Tudor Jones and he says: ‘Do you know that when Bitcoin went from $17,000 to $3000, that 86% of the people that owned it at $17,000 never sold it?’. Well, this was huge in my mind. So here’s something with a finite supply and 86% of the owners are religious zealots. I mean, who the hell holds something through $17,000 to $3000? And it turns out none of them — the 86% — sold it.”
The unity of the Bitcoiners of last resort allowed for a strong rebound in March 2020 and Bitcoin continued to advance block by block in its revolution as it has since its inception. Stanley Druckenmiller explains that he has been buying Bitcoin ever since, without saying how much he holds. Which is one of the golden rules of Bitcoin, I remind you: talk about Bitcoin, but never about your Bitcoin.
I've written a lot about Ray Dalio's positions on Bitcoin in recent years. As I've followed everything he's said about Bitcoin, I've been a privileged witness to his changing attitudes. While he didn't believe in Bitcoin at all at first, Ray Dalio eventually evolved month by month to admit during 2021 to buying Bitcoin. Just in case.
“It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy.”
Despite this, Ray Dalio continues to express some thought-provoking opinions about Bitcoin from time to time. The latest one? The one expressed during the fall of 2021 when he said that if Bitcoin gets too big, governments will kill it.
I'll let you read my response to that:
For me, if Ray Dalio is right about governments wanting to destroy Bitcoin at some point in the future, I remain ultra optimistic that Bitcoin will continue its revolution and come out even stronger.
Alan Howard is a British billionaire hedge fund manager who invests in Bitcoin, but mostly in Bitcoin-related companies. A way to take advantage of the booming ecosystem around Bitcoin and cryptocurrencies. In 2021, for example, he made a $4 million investment in the Asian crypto trading app Kikitrade.
Earlier in the year, he announced investments in CoinShares or the Canadian crypto lending company Ledn. Finally, in April 2021, it was announced that Brevan Howard's hedge fund's direct investments in cryptocurrencies represented 1.5% of his main fund's positions.
I end this quick overview with Steve Cohen, a billionaire hedge fund, who was for a long time what we call a crypto skeptic. As is the case with other Wall Street financiers, it was his son who made him realize the incredible potential of this innovative new world:
“My son convinced me this was something I needed to do.”
Once he decided to delve into Bitcoin, Steve Cohen quickly drew parallels to the early days of the Internet in the 1990s:
“Once I decided there were opportunities, and I thought this could be a space like the Internet - it could be incredibly transformational - I wasn't going to miss this.”
His entry into Bitcoin and cryptocurrencies dates back to a few months ago, but we can also see that he followed the same path that all will follow: sterile opposition before finally opening his eyes to the need to embrace this revolution to be among those who will benefit the most.
While some people continue to waste their time spreading misinformation about Bitcoin, the world's best hedge fund managers are changing their minds about Bitcoin by deciding to jump on board the Bitcoin revolution.
This should give you pause if you still doubt Bitcoin's potential for the future. Do you think that such financiers who have accumulated billions of dollars in profits over the years could be so wrong about Bitcoin?
I already have my answer, because I am already convinced of the future success of Bitcoin. I'll let you make up your mind by incorporating this into your thought process.
In Bitcoin We Trust
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