Billionaire investor Howard Marks, the founder of asset management company Oaktree Capital, has firmly warned his clients against investing in high-flying cryptocurrencies, describing them as not real.
“In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it,” the analyst wrote in his latest Oaktree memo to investors.
Marks compares cryptocurrencies to the Tulip mania of 1637, the South Sea bubble of 1720 and the internet bubble of 1999.
“Serious investing consists of buying things because the price is attractive relative to intrinsic value. Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price,” wrote the investor, whose prescient memos predicted the financial crisis and the dotcom bubble implosion.
According to Marks, bitcoin and ether speculators may take a big hit, when the current bull market takes a nosedive.
“They’re likely to keep working as long as optimism is present. But their performance in bad times is far from dependable. What will happen to bitcoin’s price and liquidity in a crisis if people decide they’d rather hold dollars (or gold)?” he writes.
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Bitcoin has surged nearly 160 percent this year, while the ethereum cryptocurrency is up about 2,300 percent over the last twelve months, according to data from industry website CoinDesk.
“Nobody has been able to make sense to me of these currencies,” the analyst says.