Elliott Management Calls Cryptocurrencies a Scam, Bubble and Fraud

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Elliott Management Calls Cryptocurrencies a Scam, Bubble and Fraud

Bitcoin is the name of human foolishness! At least, that may be the lesson from Elliott Management’s newest client letter.

Elliott Management labeled cryptocurrencies as “one of the most ingenious hoaxes in history” in a creative January letter that is equal parts scathing of the hyperbole surrounding cryptocurrencies and respectful of the way they have captured public imagination. (See also: Cryptocurrencies grew by almost 1,000% in 2017.)

“FOMO (Fear of Missing Out) has decisively overcome WTHIT (What the Hell Is This?? ),” Elliot wrote to customers, explaining the current crypto craze.

Cryptocurrencies are the marketing power of innovators, financiers, and “those who adore the notion of purchasing a black box (which is plainly empty) for the price of a Kia and fantasizing that it will transform into a Mercedes,” according to the hedge fund.

Billionaire Paul Singer is the founder and president of Elliot Management, which managed $34.1 billion in assets as of January 1.

In its epic bitcoin smackdown, the hedge fund said, “This is not simply a bubble.” It is more than a forgery. It is arguably the highest representation of humanity’s capacity to grab ether and expect to ride it to the skies.”

As frequent readers of Investopedia are undoubtedly aware, 2017 was a watershed moment for cryptocurrencies. Their prices surged once they were widely known due to substantial media coverage and scrutiny from regulatory agencies, governments, and public intellectuals.

Cryptocurrencies differ from fiat currencies in that they are not backed by a centralized body. They differ from gold in that they have no real-world uses (yet), and the theoretical restrictions to their numbers (which have been established to mimic gold’s role as a store of value) are readily countered by hard forks. (Also read: Will Bitcoin See 50 Forks in 2018?)

  Crypto ATM

Elliot Management was especially harsh on hard forks, which raise the amount and value of cryptocurrencies in circulation. “Perhaps we can coin a ‘More’s Law,’ which is: as the aggregate purported market value of cryptocurrencies continues to explode higher, the incentives to conjure more of them, more versions of them, and more imitations and ‘improvements’ of them, continue to soar,” the authors of the note wrote in a play on the term “Moore’s Law.” That is shorthand for the semiconductor hypothesis, which states that the number of transistors in an integrated circuit generally doubles every two years.

In their letter, they also discussed human nature and its follies.

“But isn’t it glorious that when the equivalent of nothing attracts priests and parishioners who inflate the price, the mob’s willingness to buy it at higher and higher prices is seen as a validation of the thing, rather than an indication of the limitless ignorance of large swaths of the human race?” Elliot Management authored this.

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author holds a minor quantity of bitcoin as of the day this article was published.

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