Alex Dovbnya
Eisman raised concerns about the lack of clarity surrounding Bitcoin’s role in the financial system and questioned its usefulness as a currency
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Steve Eisman, the prominent hedge fund manager and subject of Michael Lewis’ book The Big Short, recently criticized the concept of Bitcoin as a currency on Bloomberg’s Odd Lots podcast while questioning its usefulness.
“Why is Bitcoin a currency?” Eisman asked, “It was like a given, but it’s not a given for me.” Eisman pointed out that the assumption that bitcoin is a currency has often been made by bitcoin experts who have appeared on podcasts, without much about it to discuss the actual reasons why it should be considered a currency.
“In the second part of the story about how bitcoin should trade, they all agreed, which is that the fiat currency issued by the government has been horribly debased due to all the deficits that all these countries have been spending, but if you the Short the dollar, it’s hard to cut it short. Therefore, you should buy bitcoin as a hedge against the devaluation of all currencies,” he said.
However, Eisman explained that the idea that Bitcoin would behave as a hedge against other currencies depreciating was problematic because it actually didn’t work that way. “The problem is that it actually did the opposite. So what was the point?” he asked.
The largest cryptocurrency has underperformed over the past year due to the US Federal Reserve’s tightening monetary policy aimed at fighting inflation.
Eisman further argued that Bitcoin’s large price swings, often 25% or more in a six-month period, made it an unreliable currency. “You can’t have a currency that moves 25% every six months. What problem does this solve? Is there a problem with the currency? It’s not even a problem. FX markets are the most liquid markets in the world,” he said.
The “Big Short” star concluded by saying that he doesn’t understand the purpose of owning Bitcoin except as a speculative investment. “I don’t understand what solves bitcoin and I don’t understand the purpose of owning it other than just another form of speculation. I just don’t get it,” he said.
Eisman’s comments on Bitcoin reflect a broader debate among financial experts about the usefulness of cryptocurrencies. Their potential and usefulness remains a contentious issue.
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