Billionaire John Paulson Calls Crypto ‘A Limited Supply of Nothing’

Founder of Paulson & Co. prefers gold as a hedge against inflation.

share

key takeaways

  • Paulson said unlike his “asymmetrical” bet against the US subprime mortgage lending market in 2007, crypto has “unlimited downside”
  • Paulson is in part known for using credit default swaps to bet against the US subprime mortgage lending market in 2007.

While some billionaires are bullish on crypto, John Paulson is not one of them.

The founder of New York-based investment management firm Paulson & Co. called cryptocurrencies a bubble during an interview on Bloomberg TV, also describing them as “a limited supply of nothing.”

“Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless,” he explained in an episode of Bloomberg Wealth with David Rubenstein. “Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies.”

An executive at Paulson & Co. did not immediately return Blockworks’ request for comment. 

Paulson is in part known for using credit default swaps to bet against the US subprime mortgage lending market in 2007. Funds he ran were up $15 billion that year, and he collected an estimated $4 billion for himself, the Wall Street Journal previously reported.

The hedge fund billionaire said during the interview that his firm shorted subprime because it was asymmetrical – the upside far outweighed the downside – but noted that crypto is too volatile to short. 

“In crypto, there’s unlimited downside,” he said. “So even though I could be right over the long term, in the short term, I’d be wiped out.”

Paulson said he prefers investing gold in times of inflation, noting that he expects inflation levels to exceed expectations. Federal Reserve Chairman Jerome Powell said during his virtual Jackson Hole policy forum address on Friday that today’s 4% inflation will not be lasting, also claiming that current wage increases are unlikely to impact inflation significantly. 

Paulson’s comments come as other billionaire hedge fund managers have vocalized the opportunity they see in crypto investments.

Paul Tudor Jones, founder and CIO of Tudor Investment Corporation, said in June that bitcoin was a good portfolio diversifier to combat inflation, noting that he favors allocating 5% of a portfolio to the cryptocurrency.

Steve Cohen, CEO of hedge fund manager Point72, said during a webinar that he has been looking into crypto and is now “fully converted.” The billionaire noted at the time that he cares more about how disruptive blockchain technology can be than bitcoin itself.

A survey published by Intertrust Group found that about one in six hedge fund managers expect to invest more than 10% of their investment holdings in cryptocurrencies in five years.

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

kamino cover.jpg

Research

Kamino has solidified its position as the leading money market on Solana and is emerging as a DeFi bluechip. Although DeFi competition is fierce, Kamino has kept iterating on its product to provide the best-in-class UX, paired with a robust risk management framework and battle-tested infrastructure. Given the rollout of Kamino Lend V2, the protocol may scale aggressively over the coming months, penetrating previously untapped markets in Solana DeFi.

article-image

Why that the bull market might not start until 2025

article-image

August’s annual headline figure came in at 2.3% after an upward revision Thursday, so things are moving in the right direction 

article-image

MSTR’s stock price was roughly $248 at 2 pm ET Thursday

article-image

Ever since rates came off zero and fiscal deficits exploded, markets have started paying close attention to how the government is funding itself

article-image

Solana memecoins are collectively at an all-time high

article-image

Optimistic rollups like Optimism, Arbitrum and Base are seeing rapid adoption relative to zk rollups