Financial experts are split in their opinions when it comes to cryptocurrencies.
But Australian fund manager Michael Glennon is well and truly in the bearish camp.
In an opinion piece for the Australian Financial Review, the founder of Glennon Capital referred to bitcoin as a “quasi-ponzi scheme”.
Glennon Capital is a listed fund manager with a focus on small-cap stocks.
“Let me be clear. I’m bored of bitcoin already,” Glennon wrote.
“I’m bored with the influx of LinkedIn requests I’m getting from cryptocurrency traders I have never met and I’m bored of explaining how useless all cryptocurrencies are and how you’re better to actually buy real businesses that make real profits.”
Glennon’s critique focused on bitcoin’s lack of practical use a currency, rather than its use-case as a store of value.
He said until bitcoin is used consistently — from retail transactions to utility bill payments — then it has no inherent value.
“It’s a currency that doesn’t do anything, is not backed by any sovereign nation, is not accepted anywhere, is hard to buy and sell, and has no fundamentals supporting it,” Glennon said.
That doesn’t mesh with Glennon’s view of what makes a good investment — companies that either make a cash profit or provide an income stream.
“I own a small handful of businesses that I know well. They are real businesses that make real cash profits. I can’t understanding buying something that cannot be used anywhere,” he said.
Given that you earn no interest on a cryptocurrency investment, Glennon said it can only be used to sell to someone else.
And while Ripple — which is the company behind the XRP token — has had some recent success in wooing the corporate sector, Glennon said investments from established payment providers such as Visa and Mastercard were unlikely in the near term.
“Given the peer-to-peer nature of digital currencies and the potential for money laundering and tax evasion, longer-term on a fundamental basis there are still huge legislative risks for any corporate looking to invest in rolling out the technology on a mass scale,” he said.
In light of his bearish view, Glennon provided some succinct words of advice for crypto investors who’ve their initial investment multiply at a rate of knots:
“Lock in your profits and think yourself lucky that you have made a profit in the greatest bubble in recent times,” Glennon said.
“Then go and put your money into a real business that makes money.”