In case you hadn’t noticed, the narrative droning from mainstream media sites, newspapers and press conferences seems to be following a distinct theme: “Trusted, wealthy older gentleman believes cryptocurrency is a scam, and here’s why”. But let’s take a look at the favored business practices of these “vulture capitalists” and ask: Are they really the people whose advice you’d trust on a new and radical technology that wants to disrupt their status quo?
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Following Charlie Munger (Berkshire Hathaway), Jamie Dimon (JP Morgan) and Mark Carney (Bank of England), the latest broadside has been fired by Paul Singer’s Elliot Management — a hedge fund with $34 billion USD in assets under management, who have called bitcoin “one of the most brilliant scams in history”. Business Insider subjectively labeled the opinion as a “brutal takedown”.
But what gives Elliot Management, and especially their principal Paul Singer, any specific insight in to the world of cryptocurrency?
The answer is: nothing. Much like Munger espousing his view on Bitcoin, neither Singer nor Elliot specializes in computer science, economics or technology. However in the eyes of the mainstream media, the fact that he is a very wealthy man, wearing a suit, who also happens to be a political powerbroker, means he has some kind of authority. This is somehow extrapolated to mean he is also an authority in cryptocurrencies.
And like the Mungers and Dimons of the world, Elliot Management has shown its elitist attitude and dislike for the regular person. It is a subtext in many of their dismissals of Bitcoin, a software protocol that has the potential to take their power away.
It is reflected in Elliot’s recent letter to investors where they describe Bitcoin as “absolutely and utterly nothing” but an example of “human folly”, and lambast large parts of the population as having ”limitless ignorance” — essentially wishing for investors to lose their money. For example:
“[I]s it not glorious that when the equivalent of nothing attracts priests and parishioners who run up the price, the very willingness of the mob to buy it at higher and higher prices is seen as validation of the thing, rather than an indication of the limitless ignorance of swaths of the human race?”
‘Vultures’ Protecting What Works – for Them
The always relevant, late George Carlin commented on this attitude in 2006, when he said of those he called the “real owners” of America, “they don’t give a f*ck about you… they want more for themselves and less for everybody else.”
Whatever the relevance of Elliot’s criticisms, they aren’t anything the Bitcoin and Cryptocurrency community have not heard before. They repeat the erroneous “nocoiner” assumption that someone, somehow will “print” more Bitcoin, the “revelation” that increasing prices will spawn more coins and the fact that speculation exists in a market full of human participants.
But it is especially rich (pardon the pun) coming from a hedge fund founded by Singer, a man who is known as “The Vulture”, according to New York Times best selling author Greg Palast.
Elliot Management is one of the more renowned so-called “Vulture Capitalist” firms — the term that refers to their widely despised business model of buying the distressed debt of the poorest nations on earth and then suing for full payment. The practice is illegal in many jurisdictions.
Squeezing the Poor: How the Vulture Capitalist Model Works
Whilst many creditor nations realize these old, distressed loans are unlikely to ever be repaid — some are left outstanding for decades — “vulture” firms swoop in and offer to buy the outstanding bonds for pennies on the dollar. Then, once in legal possession of the bonds, they approach the country in debt and demand payment in full.
If they do not manage to wrangle the funds directly from the government, they head to court to sue the country for failing to pay its debts. Some of the countries vulture capitalist firms like Elliot Management have demanded money from include some of the poorest in the world, such as Liberia and the Congo.
Singer once defended his business model to Bloomberg [on January 8, 2008] stating that “our disputes have always been with sovereigns who can pay but refuse to do so.”
This is of course subjective. When the corrupt former Peruvian president Alberto Fujimori was readying to flee into exile in 1996, Singer, whose old firm had bought up $11 million USD in Peruvian debt, demanded the full payment of $58 million. Singer then effectively confiscated Fujimori’s jet until the corrupt leader instructed the Peruvian treasury to repay the debt.
So while the sovereign in this case “could” pay, it sounds a hell of a lot like blackmail at the expense of an impoverished population. Perhaps if Singer insisted that the $58 million was spent on initiatives within the Peruvian economy, then this practice may be looked upon more favorably.
This is the calibre of firm that the mainstream media is reporting on with their opinions regarding cryptocurrency.
Also Watch Out for Gold Shills
It also isn’t the first time Elliot Management have expressed negative sentiment towards bitcoin.
Laughably, in early 2014, Singer commented that he was “shocked” that the price of bitcoin was increasing as gold declined, but reasoned that it had as much chance as government fiat of “[standing] the test of time.”
At the time Singer was in the midst of shilling gold, as his firm had invested heavily in 2013. ”If you want an alternative currency, check out gold … it is not just a computer entry in the ether somewhere, and it is currently available at a good price.”
Not surprisingly, Elliot lost on its gold investments; gold had entered a multi year bear market in 2011 and Singer’s shill was simply in defense of his firm unsuccessfully trying to pick the bottom.
Now, after a 20x increase in price over 2017, Singer’s firm seems compelled to let investors know that they are also skeptical of the much heralded 21 million BTC limit and further, they believe that cryptocurrencies are completely worthless.
Cryptocurrency Followers Understand How Technology Works
You would think that with such a reputation in the financial world Elliot Managements’ reasoning would be backed by solid, indisputable facts and not the vague criticism such as that if the market cap of cryptocurrencies continues to grow, more coins will be created by either forking the original code or via a raft of new projects.
While superficially true (more coins and forks will occur) the “brutal takedown” is hardly a revelation.
Similarities can be drawn between the search engine wars of the early 2000s where a number of options competed to become the leader in an emerging field. We know that Google won the day, but also that some people left companies and started their own interpretations with their own points of difference, much like a fork. Many failed, but those that succeeded have become giants of industry.
These Are Not the Opinion Leaders You’re Looking for
So, instead of measured and researched criticisms of cryptocurrency (of which there are many), Elliot Management’s concerns sound like the rantings of a butthurt Twitter troll that missed the bull run of a lifetime, despite having had at least 4 years to study the software and its potential implications.
And perhaps it is. Why would a multibillion dollar hedge fund feel the need to bash Bitcoin if they weren’t on the other side of the trade?
So, what are we meant to believe in regards to Elliot Management? That a firm which has no qualms about suing the poorest nations on earth for profit, somehow has the ethics to point out a scam and not attempt to profit from it? Even if Bitcoin was as malicious as even the most strident anti-bitcoiner could suggest, a “vulture capitalist” firm would likely take on the risk, especially when it was in a ‘distressed’ state.
Perhaps then, the disgust being shown by these wealthy abominations comes from the fact that their bias led them to dismiss the technology and they are bitter about having been on the wrong side of the trade for the entire bull run.
Whose opinion and advice do you trust on cryptocurrencies? Let’s hear what you think in the comments.
Images via Pixabay