The “Big Short” Investor Isn’t Touching Bitcoin

Christopher Liew, CFA
·3 min read
New virtual money concept, Gold Bitcoins

Warren Buffett isn’t the only harsh critic and basher of cryptocurrencies. Steve Eisman, the head of private investment firm Neuberger Berman, said about bitcoin, “I don’t see the purpose of it.” Eisman rose to fame through the Hollywood flick “The Big Short,” an adaptation of the book The Big Short: Inside the Doomsday Machine, authored by Michael Lewis.

Actor Steve Carrell played the role of a hedge fund manager in the movie. The character was presumably based on the exploits of Eisman during the 2008 financial crisis. He made a fortune from shorting credit default swaps when the U.S. housing market collapsed.

Like Buffett, Eisman will not invest in something he doesn’t understand. Despite the hype surrounding bitcoin in 2021, he prefers to stay away from the highly volatile cryptocurrency space. Its value continues to swing wildly. Eisman adds that crypto investors are merely speculating.

Eisman says, “You’re buying and selling something that’s impossible to value.” Bitcoin’s price peaked at $40,971.61 on January 8, 2020, only to slide 16.9% to $33,922.96 five days later. As of this writing, bitcoin trades even lower at $31,648.99. Still, the price of the world’s most popular digital currency is 238.2% higher than a year ago.

Bitcoin needs regulation

The gold versus bitcoin debate is starting in 2021. Loyal cryptocurrency followers are floating the idea that bitcoin could be the hard currency of choice. It could also end gold’s reign as the best store of value down the road. The optimistic outlook stems from the growing number of institutional investors buying bitcoin.

Eisman’s main beef against bitcoin is the lack of controls to protect investors. He’s wondering why governments aren’t regulating the cryptocurrency market heavily. The recent pullback of bitcoin may be due to fears that the Biden administration in the U.S. will step in to place controls or regulate cryptocurrencies.

In 2018, Eisman said he has no plans to make bitcoin his next “big short,” and that position hasn’t changed today. He will not invest in bitcoin because he does not specialize in currency trading. Also, he doesn’t believe it’s possible to assign bitcoin a fair market value.

A safer alternative for outsized gains

The information technology sector in Canada’s stock market ruled in 2020 and is likely to turn in another stellar performance in 2021. Investors looking for outsized returns could consider Nuvei (TSX:NVI) following its highly successful Initial Public Offering (IPO) last year.

The tech’s IPO price was $26 on September 18, 2020, and trades at $64.34 as of January 27, 2021, a 147.5% return. Market analysts are bullish and see Nuvei climbing further by 24.3% to $80 in the next 12 months.

Nuvei is the TSX’s largest IPO ever after raising as much as $805 million in gross proceeds. The market cap currently stands at $8.89 billion. The company provides the intelligence and payment technology that helps its brand partners to thrive. Through Nuvei, businesses can remove payment barriers, optimize operating costs, and increase acceptance rates.

Thus far, Nuvei’s proprietary platform supports 450 local and alternative payment methods in nearly 150 currencies. The company expects 200 markets to have direct connections to all major payment card schemes.

Unanswered questions

Is bitcoin ready to replace gold? Will governments regulate the cryptocurrency market? Should institutional investors support bitcoin? For the “Big Short” investor, the better part of valour is to stay clear of the cryptocurrency market.

The post The “Big Short” Investor Isn’t Touching Bitcoin appeared first on The Motley Fool Canada.

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