This top ASX fundie reckons Bitcoin is going to zero

Is Bitcoin heading for a sad ending?

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Bitcoin (CRYPTO: BTC), and cryptocurrencies by extension, are one of the most controversial asset classes that have ever existed. Those who are bullish on Bitcoin are unabashedly and decisively so.

You’ll frequently hear things like: “One day everyone will be paying with Bitcoin”. Or: “You can’t afford not to have Bitcoin in your portfolio” from this camp.

On the other side of the coin (pardon the pun), there are those who think Bitcoin is a con, a ruse or a scam (not necessarily in that order). You’ll hear this ‘bear camp’ say things like: “Bitcoin is useless”. Or: “It has no intrinsic value”.

Both sides have heavy hitters in their column. Bitcoin’s bulls include famous investors like Robert Kiyosaki, Ray Dalio and (occasionally) Elon Musk. On the other hand, those who have decried Bitcoin and cryptocurrencies include the great Waren Buffett and Charlie Munger.

So who’s right? Unfortunate, this is one of those things that will be proven with hindsight one day. A perspective, unfortunately, not yet available.

But today, we can add one famous fund manager to the doubters’ list.

Magellan’s Hamish Douglass says Bitcoin ‘going to zero’

Hamish Douglass is one of the most famous and successful fund managers in Australia. He’s the chief investment officer of Magellan Financial Group Ltd ( ASX: MFG), the ASX’s largest public asset/fund manager. Mr Douglass’ views on everything from tech to the state of the share market are frequently sought after.

That’s why it’s so fascinating to see him come out so brusquely against Bitcoin.

According to a report in the Australian Financial Review this week, Mr Douglass is firmly in that latter camp. He told the AFR that cryptocurrencies are “one of the greatest mass delusions in modern history”.

He also said that the currencies, including Bitcoin, are destined for an ultimate value of zero:

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.

Far from seeing any value in cryptos like Bitcoin, Douglass instead labels them as part of the “areas of reckless speculation” that are currently present in global markets.

He points to the recent share price performances of ‘meme stocks’ like Tesla Inc (NASDAQ: TSLA), GameStop Corp (NYSE: GME) and AMC Entertainment Holdings Inc (NYSE: AMC) as other examples. He says Bitcoin is no different with “zero intrinsic value” and is tipping a sad end:

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.

A collapse could spark “contagion”

Even though Mr Douglass (as you might expect) doesn’t hold cryptocurrencies like Bitcoin in any Magellan funds, he is still worried about the broader consequences that may occur if investors see a collapse.

He warned the AFR that we could see “a contagious hit to sentiment” if the risk from cryptocurrencies keeps “ballooning”, foreseeing a “contagion in the event of a collapse [hurting] broader investor confidence and [upending] markets”.

Something to note if you’re an investor in cryptocurrencies.

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Motley Fool contributor Sebastian Bowen owns shares of Bitcoin and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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