Stanley Druckenmiller “felt like a moron” not buying Bitcoin as he watched it go from $50 to $17,000. Now, if Jay Powell keeps acting like he’s been acting, BTC is “going to have the wind behind” it, but the minute the “tightening” starts, markets should go down.
If you bought the top crypto assets, don’t worry; you are not alone. Even the big guys make these mistakes, and legendary investor Stanley Druckenmiller is one of them.
During his recent interview with The Hustle, while talking about investing and cryptocurrencies, Druckenmiller shared that he lost $3 billion at the top of the Dotcom Bubble just because he couldn’t watch others making money from the sidelines. This was after he had ridden the tech boom to a T, made billions of dollars, and sold everything. He said,
“It was all because I got emotional and dropped every tool of discipline I’ve ever had.”
Druckenmiller announced that he had become a Bitcoiner late last year, but he actually bought it a few months back at $6,500.
Yet again, though, much like everyone, he had a difficult time just watching the cryptocurrency rip higher and higher and felt like a “moron” for not buying it until now. The investor shared,
“For the first move in Bitcoin — I think from like $50 to $17,000 — I just sat there aghast…I wanted to buy it every day. It was going up, and — even though I didn’t think much of it — I just couldn’t stand the fact that it was going up, and I didn’t own it. Fast forward: I never owned it from like $50 to $17,000; I felt like a moron. Then it goes back down to $3000 again.”
Jay Powell “going to have the wind behind” BTC
Druckenmiller bought Bitcoin because his views had evolved. While about 5-6 years ago, he saw Bitcoin and crypto as a solution in search of a problem, it changed when he found the problem. He said,
“The problem was Jay Powell and the world’s central bankers going nuts and making fiat money even more questionable than it already has been when I used to own gold.”
But what’s even more interesting is the community, the crypto fanatics. Adding to the “new Central Bank craziness phenomenon” is the fact that “86% of owners are religious zealots.” He added,
“I mean, who the hell holds something through $17,000 to $3000? And it turns out none of them — the 86% — sold it.”
And as long as Jay Clayton keeps acting like he’s been acting, Bitcoin is “going to have the wind behind” it, said Druckenmiller.
Because Bitcoin is a brand, has a finite supply, and has been around for over a decade now, Druckenmiller feels, “it’s going to be very, very tough to unseat.”
And here comes Ethereum, about which he’s a “little more skeptical of whether it can hold its position” and sees it as Yahoo before Google came along.
As for Dogecoin, he isn’t really bothered by it as he doesn’t see its utility; rather, “It’s just this wave of money in the Greater Fool Theory,” Druckenmiller said, adding,
“Don’t go long, and don’t go short. I mean, unless you like going to Vegas, then I guess it’s okay.”
Making Large Concentrated, High Conviction Bets
During his interview, Druckenmiller also shared insight into parallels between the recent tech sell-off and the Dotcom Bubble, which have some similarities but also differences in the way that valuations in both periods go to “speculative levels” but the monetary policy is “crazy” now.
“So we have an asset bubble. Now that’s not just in tech stocks; it’s in everything,” he said.
The biggest risk right now to the bubble, especially the equity market, according to him, without a doubt is “inflation strong enough that the Fed responds to it.”
“No doubt about it. This bubble has gone long enough, and it’s extended enough that the minute they start tightening, the equity market should go down a lot.”
Talking about Investment, Druckenmiller said it’s all about making concentrated, high conviction bets. He shared how the likes of Warren Buffett, Carl Icahn, and George Soros are not buying 35 or 40 names and diversifying but making largely concentrated bets where they have a lot of conviction.
It actually decreases your overall risk because then you only have to pay attention to one massive position.
As for when to sell, if the asset you bought for a reason and those reasons are no longer valid, it’s time to sell because it’s about making money. And here comes the managing emotions while investing part because when the prices of your high conviction asset go down, you don’t necessarily sell it, but you reevaluate your thesis.
Also, “you cannot get crazy when it’s going up.”