When it comes to learning more about pretty much any subject, it is natural to turn to the experts. If we’re curious about the planets in our solar system, we might look to Neil deGrasse Tyson or Carl Sagan for more information. Both of them are widely known and respected for their expertise in outer space. Likewise, in the world of traditional finance it makes sense to keep tabs on what big-name CEOs, famous investors, and Wall Street bankers are saying. Of course, Bitcoin doesn’t exactly fit into the realm of “traditional” finance. Nonetheless, when people like George Soros and Warren Buffett, both of whom have made many millions of dollars by taking risks in unpredictable markets, start talking about Bitcoin, it can’t hurt to pay attention.
The Bitcoin Bears
Like the rest of us, even the wealthiest of Wall Street tycoons don’t always agree. This seems particularly true when it comes to Bitcoin and cryptocurrency in general. Warren Buffett, CEO and chairman of Berkshire Hathaway, was quoted in January 2018 as saying, “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.” As of February 2018, Buffett’s net worth was roughly $87.5 billion, making him one of the wealthiest people in the United States.
While Buffett is famous on Wall Street for his poignant analysis of the stock market, he also has a long history of being reluctant to invest in new technologies. As Fortune noted, “At Berkshire Hathaway’s annual meeting last May, for example, Buffett expressed regret for not investing in Google … (GOOGL, +1.69%) and Amazon (AMZN, +1.30%) stock years ago, having failed to appreciate the tech companies’ great potential.”
Buffett’s skepticism was echoed by Wall Street bigwig and JP Morgan CEO, Jamie Dimon, who in September 2017 slammed Bitcoin at an investor conference. “It’s a fraud” and “worse than tulip bulbs,” Dimon said at the time. Since then, however, Dimon appears to have modified his position. In January, 2018, Dimon told an interviewer he regretted making that comment, adding that, “The blockchain is real.” One would hope he thinks so, considering JP Morgan has launched its own Blockchain Center of Excellence, which claims to be “a thought leader in the blockchain space.” More ironic still is perhaps the pending class-action lawsuit filed against JP Morgan Chase, “alleging that the bank overcharged its credit card customers when they used funds to purchase cryptocurrencies.”
The Bitcoin Bulls
Like Dimon and Buffett, Wall Street heavyweight and billionaire George Soros has publicly voices skepticism concerning Bitcoin. At the World Economic Forum in January, Soros declared that, “cryptocurrency is a typical bubble.” Life comes at you fast, however. Just a few short months later, reports have emerged that Soros’ $26 billion dollar family fund is planning to invest into cryptocurrencies. In fact, Soros has already dabbled indirectly in cryptocurrencies with a large stake in Overstock.com. In August of 2017, Overstock became the first major e-commerce retailer to support payment in digital currencies. Soros may not yet qualify as a “bull,” but his newfound enthusiasm for Bitcoin is certainly a bullish sign.
While some famous financiers remain lukewarm on cryptocurrencies, a number of Wall Street executives have jumped in headfirst and embraced Bitcoin as a revolutionary financial technology. Hedge fund investor Bill Miller, notably, has put close to 50% of his MVP1 fund into crypto. Miller responded to criticism from Dimon and Buffett, as well, suggesting, “I’m highly confident to say that not one of them had actually studied it carefully… That is to say, they have strong opinions about something they haven’t really looked at.”
Perhaps even more bullish than Miller is billionaire venture capitalist Tim Draper, who recently weighed in with a public prediction of $250,000 for Bitcoin by 2020. Unlike some of his bearish counterparts, Draper has a long history of investing in innovative technologies. He was an early backer of Twitter, Skype, Tesla, SpaceX, and a known investor in Bitcoin since at least 2014.
The Future of Bitcoin and Traditional Finance
Regardless of where individual players stand, the signs are fairly clear that Wall Street is getting involved in crypto. As financial analyst Matt Greenspan put it, “Definitely Wall Street is getting involved and they are building the bridges as we speak.” Greenspan added that while nobody can predict with certainty how the market will behave, “the important thing is that [Wall Street is] ready to take on and to inject new liquidity into this market which at least should even things out and stabilise the price.” Ready they are! As CNBC reported, Bitcoin’s stellar 2017 run brought “Wall Street traders and a surge of new hedge funds in the space. The number of crypto funds rose to 245 this year, up from 167 last year and only 19 firms in 2016.”
Fundstrat co-founder Tom Lee, possibly the only Wall Street magnate to give price targets for Bitcoin, has said more than once that Bitcoin “will reach $20,000 by mid-year and $25,000 by the end of the year.” Whether or not he’s right on the price, as more corporations, hedge funds, and firms actively explore digital currencies and blockchain technology, it’s hard to see Buffett’s ominous prediction of a “bad ending” panning out.