Millionaire investor Kevin O’Leary has predicted more pain for cryptocurrency markets going ahead and called for a “celebration” over the purging of bad businesses and managements in the bear phase.
In an interview with Moneycontrol, the Shark Tank star also said the value of Bitcoin will quadruple if regulations for the crypto markets are put in place, as it would lead to strong institutional investments.
Pains have only begun
“A bottom is usually created when there is a catastrophic event like a large player going bankrupt or somebody is in deep trouble for buying crypto on over leverage. When such an event occurs, markets will bottom out. Until then, there is no bottom,” O'Leary said and added that events like the collapse of companies like Voyager “don’t matter.”
“When a big catastrophic event happens, it is going to be really ugly,” he added.
Over leverage still not shaken off
The venture capital investor and entrepreneur said there is more pain to come as overleverage in the crypto markets has still not been shaken off.
“Since there are no regulations in place, we don’t know who will blow up when. However, a positive is that when damage hits, the damage is diversified in terms of multiple countries being involved and multiple entities being in the picture. But the downsides overweigh the positives,” he said.
Institutional investors will bring stability
The investor said regulating the sector would bring in institutional investors to asset classes like NFTs, stablecoins, and cryptos and that would bring stability.
“The best thing is to start with regulating stablecoins. That will be a big encouragement for investors. Cryptos won’t recover until there are concrete policies as currently, there is no ownership with sovereign wealth managers or asset managers. Therefore, there just isn’t enough participation for it to be a real asset class,” he said.
O'Leary said it will take more bankruptcies and losses of investors’ money before the Securities and Exchange Commission takes notice and initiates regulations.
Celebrate purging of bad businesses
When asked to comment on the pains being incurred by crypto companies with respect to bottom line numbers, liquidations, and bankruptcies, he said purging of bad businesses was a healthy sign as the industry is still nascent.
“What is happening with these companies is not surprising. Weak business models, management, and managers that don’t understand the asset class in the first place are being purged and the market is getting rid of idiotic management. Only when the idiots are out can an industry come out stronger. We should be celebrating this purging,” he said.
Rebukes crypto critics
Rebuking staunch crypto critics like billionaires Warren Buffett and Charlie Munger, O'Leary said a new asset class is always looked down upon and that everyone tends to make a wrong decision at some point in life.
“They have great success, does not mean they are right on cryptocurrencies. The productivity, transparency, and efficiency of blockchain are immense in the long term. The other way to look at this is this – There will be unprecedented institutional capital in cryptocurrencies. The current bear market is just a blip. Extraordinary outcomes take time,” he said.
Citing an analogy of e-commerce giant Amazon, O'Leary said since being listed, the stocks of the company have seen 38-50% depreciation but good management ensures that such downsides are temporary.
Crypto regulations will quadruple Bitcoin
When asked about his take on Bitcoin, he said it will trade above what it is today, however, he was more concerned about having regulations in place so that cryptos can be bought as regulated security, like a BTC ETF.
“Once regulations are in place, the price of Bitcoin will quadruple,” he said.
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