There are hardly any cryptocurrency reports that don’t mention price volatility. In fact, this quality is what the industry has come to be known for over the years. Cryptocurrencies on their own have no intrinsic value and present so much risk of loss. For this reason, huge corporations and big Wall Street players like George Soros, Warren Buffet, and Jamie Dimon have always been openly skeptical about all coins, the major ones in particular like bitcoin, litecoin, and ethereum. While there are differing opinions that dispute the criticism meted out by these senior investors, their words are backed by years of accumulated knowledge and experience in the finance industry.
However, despite its volatility, the cryptomarket is very similar to the stock market. This means that technical knowledge of blockchain is not necessarily a prerequisite for investing in the industry. All that is needed is a fundamental understanding of supply, demand and other economic factors that drive the market. Keeping this in mind, George Soros is set to invest in cryptocurrency despite his earlier criticism.
The 87-year-old tycoon has racked up a sizeable investment portfolio over the years, and while his peak days may be behind him, he has made it clear that he’s not done yet. His perception of Bitcoin was especially negative, and he considered it a confusing form of investment that is completely based on a misunderstanding. For someone who lambasted the whole idea of crypto assets, it’s easy to wonder why Soros has suddenly had a change of heart.
Soros Prepares to Invest in the Cryptocurrency Market
According to Soros, Bitcoin fluctuates in value by at least 25% each day, making it impossible for the currency to be used to pay wages and other compensations. In January 2018, Soros openly stated that Bitcoin is a bubble, saying that it cannot be called a currency because it has no stability as a store of value.
The Soros Fund Management has assets worth $26 billion and part of it has been set aside as capital for cryptocurrency investments. Bloomberg reported that Adam Fisher, head of macro investing at Soros Fund Management has received internal approval to carry on with the trade of digital assets. Although he has indeed received the approval, he has not personally made any bets on digital assets yet
George Soros is not the first Bitcoin critic to change his stance. The history of Bitcoin has seen many public figures who openly show skepticism and disinterest in the cryptocurrency, only to change their minds later and invest in it. Jamie Dimon, CEO of J.P. Morgan who called Bitcoin a fraud in October 2017, has also changed his mind. Older, more traditional firms are also taking an interest in the industry, with venture capitalists like the Rockefellers making moves to enter it. Despite his next foray into the crypto markets, George Soros believes that Bitcoin is mainly used by individuals for tax evasion and by dictators as a way to build nest eggs in other countries.
The Cryptocurrency Investment Decision
The decision of the Soros Management Fund to consider cryptocurrency trading is a result of the falling price of Bitcoin in 2018. Since its peak of $20,000 in December 2017, the price of BTC has dropped to almost $6,000 in a devastating market correction. Bitcoin volatility has surpassed expectations several times. Its performance in 2018 has been no different, with the continuous fluctuations on the 24-hour market chart.
Since early 2018, BTC has seen bearish movements where it continues to lose support. Between January and March, invested cryptocurrency funds generally declined by an average of 52% in value. Hedge funds, on the other hand, appreciated by an average of 0.4%. George Soros sees this negative volatility as one of the pitfalls of investing in Bitcoin, and it is no surprise that other Wall Street players agree. However, compared to the price of BTC in January 2017, there has been an upside bullish movement. The average return of funds invested in cryptocurrency in 2017 was 1,522% which is massive, compared to the average return on hedge funds which was 7.2%.
There is speculation that the negative comments by Soros played a part in the BTC price drop. His knowledge of macroeconomics has set him apart as a person who influences the investment scene. Since Soros made his comments, the markets have seen a 41% decline. If indeed he ends up investing in crypto assets, the markets may see a short-term boost. This doesn’t matter to big investors like George Soros who are more focused on the long-term rewards in the industry. Whether he has an agenda or not, one thing is certain: profit is a major driver in his decision.
There is no doubt that the best time to invest in cryptocurrency is now because the price of Bitcoin has dropped considerably. Although there have been predictions by notable experts like CNBC’s Brian Kelly and John McAfee that the cryptocurrency will recover, it may take a while for that to happen. George Soros knows this and plans to capitalize on it.
John McAfee has predicted that Bitcoin will hit $1 million in 2020 and if its price is anywhere near that figure, then putting funds in the market when it is worth $6,000 is a great investment. However, people like Jordan Belfort have also predicted that Bitcoin will crash. Recently, there has also been tension and new unfavorable regulatory developments in the space. Investors are discouraged by the continuous regulatory scrutiny and hacks that plague the entire industry. This has led to a general decrease in the interest and buzz around Bitcoin.
George Soros is a Hungarian-based American billionaire who is considered a tycoon in the world of business. He has proven himself time and again as a true macroeconomic guru. His predictions and statements are regarded in high esteem and trust, globally.
George Soros might be seen as a controversial person for several reasons, but where investments are concerned, he’s hardly wrong. So when he came out to say that Bitcoin cannot function as an actual currency, it caused a buzz. However, he failed to predict Bitcoin’s hard tumble which he now finds favorable.
Soros’ family office has a stake in Overstock.com and is currently the company’s third-largest shareholder. The retail giant was one of the first companies in its industry to fully embraced the use of cryptocurrency. In fact, it planned to launch its own cryptocurrency exchange. So in some ways, this is not his first encounter with crypto investments. Unfortunately, the company has come under the scrutiny of the SEC for its planned Initial Coin Offering (ICO). This has led to a whopping 43% year-to-date decline in the company’s shares.
Although Soros has expressed his intentions to move into the industry, the specifics are still unclear. There is still a lot of speculation about what his exact motives are. For now, he seems to be fine with the performance of Bitcoin because the current decline may signal a price growth in the near future. Wall Street moguls like the Rothschild family and Alan Howard are following in Soros footsteps as well. Clearly, cryptocurrency is becoming increasingly popular in the traditional finance industry. At this pace, mainstream adoption may not be as far off as it seems.