With Bitcoin having bounced almost 100% off its early February lows, dashing many hopes that the decentralized cryptocurrency 'fad' had begun to die, it appears the FUD-mongering is resonating once more among the cognoscenti.
One of the world's largest hedge funds Elliott Management, founded by billionaire Paul Singer in 1977, dedicated three pages to describing its negative view of cryptocurrencies in a fourth-quarter letter to clients, calling cryptocurrencies "one of the most brilliant scams in history."
As CoinTelegraph reports, in the letter dated Jan. 26, Elliott claims that people encountering cryptocurrency have switched from sense of “WTHIT (What the hell is this?)” to a stable FOMO (fear of missing out). Elliott likens cryptocurrency investors to buyers of a “black box” that will, according to the firm, turn out to be empty.
"We all laugh at primitive tribes which used large stones (or pigs) as currency. Well, laugh as you will, but a stone or a healthy pig is something. Cryptocurrencies are nothing except the marketing power of inventors, financiers and others who love the idea of buying a black box (which is obviously empty) for the price of a Kia and dreaming that it will turn into a Mercedes. There have been times recently when this dream has materialized within hours."
The firm does not shy away from hyperbole in the letter, insisting that cryptocurrency is the “equivalent of nothing” and that the desire to invest in it is an “indication of the limitless ignorance of swaths of the human race”, continuing:
“This [cryptocurrency] is not just a bubble. It is not just a fraud. It is perhaps the outer limit, the ultimate expression, of the ability of humans to seize upon ether and hope to ride it to the stars...
But is it not glorious that when the equivalent of nothing attracts priests and parishioners who run up the price, the very willingness of the mob to buy it at higher and higher prices is seen as validation of the thing, rather than an indication of the limitless ignorance of swaths of the human race?”
Further along in the letter, Elliot expresses skepticism about the scarcity of Bitcoin (BTC). Despite the fact that Bitcoin’s supply is capped at 21 million coins, the letter from Elliot argues that the forking of the Bitcoin Blockchain could threaten scarcity, stating:
“this limitation [scarcity] is not nearly as sacrosanct as the bitcoin evangelists would have you believe."
According to Business Insider, Elliott managed $34.1 bln as of January 1, 2018 and the Elliott Associates LP fund returned 8.7% last year
In 2017 alone, the number of digital currency-based hedge funds grew from 30 to about 130.
Traditional hedge funds have also increasingly been buying up cryptocurrencies, most famously that of American investor Bill Miller, who as of Dec. 2017 held 50 percent of his fund’s money in Bitcoin.