Eisman raised concerns about the lack of clarity regarding 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 felt like it was a given, but it’s not a given to me.” 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 that government-issued fiat currency has been degraded terribly because of all the deficits all these countries have issued, but if you short the dollar it is difficult to shorten it, therefore you should buy bitcoin as a hedge against the depreciation of all currencies,” he said.
However, Eisman said the idea that Bitcoin would act as a hedge against the depreciation of other currencies was problematic because it hadn’t actually worked that way. “The problem is, he did the opposite. So what was the point?” He asked.
The biggest cryptocurrency underperformed last year due to the US Federal Reserve’s hawkish monetary policy aimed at fighting inflation.
Eisman went on to say that Bitcoin’s large price swings, often 25% or more over a six-month period, make 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. Currency 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, other than as a speculative investment. “I don’t understand what Bitcoin is solving, and I don’t understand the purpose of owning it other than just another form of speculation. I just don’t understand,” he said.
Eisman’s comments on Bitcoin reflect a broader debate among financial experts regarding the usefulness of cryptocurrencies. Their potential and usefulness remain a controversial issue.
