- Short seller Jim Chanos says bitcoin and cryptocurrencies are a product of the long-running bull market, which is pushing investors to take more risk and “believe things.”
- Chanos agreed that bitcoin is a “libertarian fantasy” and said its main utility is avoiding tax.
- “This is simply a security speculation game masquerading as a technological breakthrough in monetary policy.”
LONDON – Renowned short seller Jim Chanos thinks cryptocurrencies are a product of the run-away global bull market and have little use beyond avoiding tax.
Chanos, known for predicting the collapse of Enron, addressed the topic of cryptocurrencies in an interview with the Institute for New Economic Thinking.
Chanos, who runs New York-based Kynikos Associates, said investors are getting “a little bit jiggy with their capital” and are more “willing to take risks, willing to believe things” the longer the current bull market goes on.
“So today we’ve got bitcoin and ICOs [initial coin offerings], which went ballistic in 2017,” Chanos said. “I suspect going forward we’re going to see more and more evidence of questionable companies as this bull market keeps advancing and aging.”
“We’re now nine years into this bull market, same as the ’90s, so I suspect that now things are starting to percolate. I think bitcoin and the ICOs are just one manifestation of that,” he said.
Chanos expressed scepticism about bitcoin and cryptocurrencies more generally. Huge amounts of capital flowed into the sector last year, which peaked at over $800 billion in value in December.
Bitcoin’s original enthusiasts were drawn to the fact that the cryptocurrency was independent of any nation state or central bank, making it theoretically immune from things like quantitative easing. They also argued that its independence made it a more viable long-term currency.
Chanos said: “For those who believe it’s a store of value in the coming apocalypse, the idea is that you’re going to have to safeguard your key under a mountain with fingerprint and eye scan security while the hordes are outside your bunker trying to get in to use it – for what, I have no idea. Because for those who believe that you need to own digital currency as a store of value in the worst-case scenario, that’s exactly the case in which a digital currency will work the least. Food would work the best!”
The interviewer then suggested bitcoin is a “libertarian fantasy,” to which Chanos replied: “That’s exactly what it is. And if you say, well, fiat currency is going to bring the world down, which could, of course, happen, then I say the last thing I’d want to own is bitcoin if the grid goes down.”
He added: “Bitcoin is still the area for people who are trying to avoid taxation or other examinations of their transactions. That’s one thing where I think it probably still has utility, but the governments have figured that out.
“This is simply a security speculation game masquerading as a technological breakthrough in monetary policy. Someone at Grant’s interest rate conference recently said that it was as if we had intentionally created a ‘monetary Somalia’.”