Cryptocurrencies are a bubble and cannot function as actual currencies because of their volatility, legendary macro trader George Soros said from Davos, Switzerland. But he didn’t quite predict the crash that some naysayers have forecast.
“Normally when you have a parabolic curve, eventually it has a very sharp break,” Soros said Thursday. “But in this case, as long as you have dictatorships on the rise you will have a different ending, because the rulers in those countries will turn to Bitcoin to build a nest egg abroad.”
Soros, who made $1 billion betting against the British pound in 1992, said that rather than suffering an abrupt break cryptocurrencies are more likely to “have a rather flat top.” At the same time, the blockchain technology behind Bitcoin can be put to positive use, he said, adding that his Open Society Foundations are using such technology to help migrants communicate with their families and keep their money safe.
Cryptocurrencies are a typical bubble, which is always based on some kind of misunderstanding. Bitcoin is not a currency, because a currency is supposed to be a stable store of value, and the currency that can fluctuate 25 percent in day cannot be used, for instance, to pay wages, because wages could drop by 25 percent in a day. So it's a speculation, it's based on misunderstanding," Soros said in Davos, Switzerland.
The value of bitcoin, a pioneer in the cryptocurrencies market, surged in 2017, jumping up to about $20,000 in December amid debates on its reliability as an investment, but then tumbled below $10,000 last week.
The billionaire former hedge fund manager, speaking Thursday at the World Economic Forum, also struck at social-media companies Facebook Inc. and Google in the speech, comparing them to gambling companies that foster addiction among users.
Soros said social-media companies Facebook and Google "deliberately engineer addiction to the services they provide." He said the "network effect" that has propelled these companies to dominance is "unsustainable" and predicted that Facebook will "run out of people to convert in less than three years."
The money manager, whose family office owned a small stake in both companies as of Sept. 30, also criticized social-media organizations for exploiting the data they control and called them a "menace" to society that needs more oversight.
"The fact that they are near-monopoly distributors makes them public utilities and should subject them to more stringent regulations, aimed at preserving competition, innovation, and fair and open universal access," he said.
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