Billionaire John Paulson says cryptocurrencies are a bubble, will prove to be worthless

John Paulson speaks during the Sohn Investment Conference in New York, May 16, 2012 (File image: Reuters)

Cryptocurrencies, despite being considered among the market's hot commodities, have drawn sharp criticism from billionaire hedge fund manager John Paulson who described it as a "bubble" that would prove to be "worthless".

Paulson, while speaking at an episode of 'Bloomberg Wealth with David Rubenstein' aired on August 30, said there is no intrinsic value attached with cryptocurrencies except for a "limited amount".

The segment is "too volatile", he said, pointing out that Bitcoin went from US$5,000 to US$45,000 within a short period.

"Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies," said Paulson, who earned a mark for betting against the US housing market more than a decade ago.

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"I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing," he further said, adding that the prices would go up only to the extent where the demand is more than the limited supply.

Notably, cryptocurrencies, which are yet to be considered legal tender in any major economy, have garnered massive interest over the past couple of years. In the recent period, the buzz over cryptos was fuelled by Elon Musk, the founder of electric vehicle maker Tesla.

Musk's company had boosted Bitcoin's value by announcing in March that it would accept payment in form of the cryptocurrency. However, Tesla ended up disappointing the crypto enthusiasts by reversing its decision in May.