Several financial experts, including former Wall Street hedge fund manager Paul Mampilly, have warned against people putting their money into cryptocurrencies like Bitcoin. It’s in a huge bubble that is going to at some point implode, he says. He, like everybody else, doesn’t know exactly when but the rapid increase in the value of Bitcoin over 2017 has every classic sign of a bubble.
The example that Paul Mampilly talks about is the stock market crash of 2000 and 2001. From 1999 there was a mania about investing in every company that was in the technology sector. Even companies that barely anyone had heard of saw the value of their stock go up by hundreds if not a thousand percent or more. Industry stalwarts like Qualcomm Inc. weren’t immune to this phenomena, either, which was up at one point almost 2700%. Eventually, like all bubbles, it popped. The value of tech companies across the board plummeted and some went out of business dropping the value of their stock to zero.
Bitcoin was valued at about $1000 at the start of 2017. By the middle of December it was close to $20,000. Many other cryptocurrencies have also shot up by similar percents. People have made money on Bitcoin, many just on paper, but many also refuse to sell. They have become emotionally attached to the cryptocurrencies and can’t see what is happening with the value are completely unreasonable.
Paul Mampilly ran a very successful hedge fund while he was on Wall Street. The hedge fund he ran for Kinetics Asset Management was judged by Barron’s as one of the best there was in the world. In 2009 he won a challenge called the Templeton Foundation Investment Competition. In the competition, each hedge fund manager started with $50 million and the challenge was to see how much they could turn that sum into in one year. Paul Mampilly got first place in this challenge which cemented his reputation on Wall Street.
Having grown tired of Wall Street and its excesses, Paul Mampilly retired early to live in North Carolina. He now writes Profits Unlimited which is a newsletter that in its first year reached over 60,000 subscribers. In the newsletter he provides investment tips and advises in regards to investing. He can often be seen on financial channels such as Fox Business News, Bloomberg TV, and CNBC.