Steve Eisman, the hedge fund manager and subject of the book “The Big Short” by Michael Lewis, recently criticized the concept of bitcoin as a currency on Bloomberg’s “Odd Lots” podcast. while questioning its utility.
“Why is bitcoin a currency?“Steve Eisman asked. “It was like it was a no-brainer, but it’s not a no-brainer to me“. Steve Eisman pointed out that the assumption that bitcoin was a currency was frequently made by bitcoin experts appearing on podcasts, without much discussion of the actual reasons why it should be considered a currency.
“The second part of the story about how Bitcoin should act, they all had the same opinion, which was that the government issued fiat currency has been terribly devalued because of all the deficits that all these countries have issued, but if you short the dollar, it’s hard to short it. Therefore, you should buy bitcoins to protect yourself against the depreciation of all currencies“, he said.
However, Steve Eisman said the idea that bitcoin would behave as a hedge against the depreciation of other currencies was problematic, because it didn&t actually behave that way. “The problem is that he actually did the opposite. So what was the point?” he asked.
The largest crypto-currency underperformed last year due to the hawkish monetary policy of the U.S. Federal Reserve aimed at fighting inflation.
Steve Eisman went on to say that bitcoin’s large price swings, often 25% or more over a six-month period, made it an unreliable currency. “You can’t have a currency that varies by 25% every six months. What problem does that solve? Is there a problem with the currency? It’s not even a problem. Currency markets are the most liquid markets in the world“he said.
The star of “The Big Short“concluded by saying that he didn’t understand the utility of owning bitcoins, other than as a speculative investment. “I don’t understand what bitcoin solves, and I don’t understand the purpose of owning it other than as another form of speculation. I simply do not understand“, he stated.
Steve Eisman’s comments on bitcoin reflect a broader debate among financial experts about the utility of crypto-currencies. Their potential and usefulness remain a controversial issue.