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Morgan Creek Digital’s Anthony Pompliano just squared off with Shark Tank investor and crypto critic Kevin O’Leary. Appearing on CNBC’s Squawk Box, O’Leary says the notion that Bitcoin is a disruptive technology has a distinct “odor of BS”.
“I want to explore the idea that there’s nothing here except raw speculation. No different than when I go to Las Vegas and put my money on black or red on a roulette wheel. Because, where is the intrinsic value inherent in deploying real capital – let’s talk real money here – and putting it into Bitcoin as a storage of value.
I get gold. For 2,000 years, including the Romans, they saw value in owning that as an asset class. Tell me why this – which is basically a digital game, is the way I look at it – has any intrinsic value.”
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Pompliano says it takes a while to understand the depth of Bitcoin and why it has value. He highlights institutions that are realizing that depth by entering the market.
“Institutions are starting to come in. You see Fidelity announcing that they’re going to start their custody and trading. Bakkt has a deadline for July. But retail, also, is coming in…
Everything that is new seems different in the beginning. And I think what you have got to realize is that, with Bitcoin specifically, money is a belief system. So the US dollar – the only reason why we use it is we believe it has value. Bitcoin has value because two people who exchange it believe it has that value. And what we’re seeing is the volume. Look at people using it. That’s ultimately what matters.
O’Leary says he invested in crypto as an experiment and watched his portfolio dive, noting it’s important for investors to understand the high risk of investing in cryptocurrency.
“I taught a class at Harvard 18 months ago. The young people in that class challenged me. I put $100 into something called Coinbase, which is a wallet thing. I bought it all. I bought all the crypto crap. I put $100 in. It’s now worth $30. That’s a 70% loss on my crypto crap. Now, I bought them all. I think that really sucks. And I think people should understand: today the hot digital is Bitcoin, tomorrow it could be whatever, right?”
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Pompliano says O’Leary’s experience shows why he believes owning Bitcoin is a better bet than a diversified crypto portfolio, noting the digital asset’s performance in the long term.
“I think the reason why Bitcoin is getting so much attention – it’s the best performing asset in the last decade. It’s drastically outperformed S&P, every other financial asset that’s out there…
If you look at the macro trend, Bitcoin has seen three drawdowns over 80% in its lifetime, in the last decade. But it is the best performing asset. And one of the correlators I draw is, if you look at Amazon stock. Amazon has drawn down over 90% twice. The entry year drawdown is over 30% on average. So it’s a pretty volatile stock in that sense. Bitcoin’s done very similar things, but what it continues to do is set new yearly lows. So don’t look at the highs, look at the lows. And again, it’s just supply and demand.
It’s a non-correlated, asymmetric return asset. And we’ve definitely, in my opinion, we’ve hit the bottom of the bear market. We’ve now entered into this bull market. Historically, about a year out from that halving period is when that kicks off. It wouldn’t surprise me if we enter a two-to-three-year bull market now. And $20,000, I think, will be a blip on the radar, just like previous past highs.”
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O’Leary says he remains unconvinced.
“I love your optimistic view of it. You haven’t changed my mind at all. It’s still garbage, and I’m not going to take real money and put it into this thing. It’s never gonna happen. Imagine taking real dollars that I’m making in cash 2.1% on and putting it into crap.”