On Wednesday (September 28), legendary billionaire investor Stanley Freeman Druckenmiller shared his latest thoughts on crypto.
Druckenmiller started his career as an equities analyst at Pittsburgh National Bank. Then in 1981, he founded investment firm Duquesne Capital Management, which had a positive return every year until he decided in August 2010 to quit the hedge fund business and close his firm.
According to a report published by the New York Times (NYT) on 18 August 2010, Druckenmiller wrote the following in a letter to investors to explain why he wanted to stop being a hedge fund manager:
“I have had to recognize that competing in the markets over such a long time frame imposes heavy personal costs,” he wrote. “While the joy of winning for clients is immense, for me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain.”
Between 1988 and 2000, Druckenmiller was the lead portfolio manager for Quantum Fund, which was started by George Soros and Jim Rogers in 1973. In 1992, this hedge fund made a successful $10 billion bet against the British Pound (GBP).
According to the NYT report, Soros and Druckenmiller pioneered a new style of hedge fund trading:
“With Mr. Soros, Mr. Druckenmiller helped pioneer an investment strategy that today is referred to as macro trading. They married two different strands of investing. On one hand, the two fund managers placed large bets on global currencies and commodities by watching charts and focusing on political trends. But they also engaged in old-fashioned stock picking, researching companies through fundamental security analysis.”
According to Forbes, the 69-year-old former hedge fund manager, who personal fortunate is estimated to be worth around $64 billion (as of 30 September 2022), is now managing his money through a family office (Duquesne Family Office LLC) that he founded in 2010.
Druckenmiller’s latest comments about crypto while he was being interviewed on September 28 at CNBC’s Delivering Alpha conference.
As you may remember, on that day, the Bank of England (which is UK’s central bank) announced that “in line with its financial stability objective” it “stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses and to achieve this “the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September.”
According to a report by Bitcoin News, Druckenmiller said that “if things get really bad” and other central banks copy decide to copy this move, he “could see cryptocurrency having a big role in a Renaissance because people just aren’t going to trust the central banks.”
Apparently, he did however point out that he does not hold any crypto at the moment since it is difficult for him “to own anything like that with central banks tightening.”
Druckenmiller also talked about crypto while he was being interviewed on 9 June 2022 by John Collison, Co-Founder and President of Stripe, at the (virtual) 2022 Sohn Investment Conference.
Below are a few highlights from comments Druckenmiller made about crypto during that interview.
On Potential Effect of Crypto on Other Asset Classes
“I don’t know whether I’m seeing it, but I expect it to. You can’t take over $2 trillion in purchasing power and then take a trillion of it out and not matter. John, I also have high frequency signals, and there certainly seems to be a strong correlation between crypto and the Nasdaq.
“I don’t think it takes a genius to figure out why. So, I’m looking at it as an indicator that way. Crypto, you know, everything that Charlie Munger says about it, I’m sympathetic to, everything that Bill Miller says about it, I’m sympathetic to.
“I think that’s a movie that has yet to be played out and one that I don’t want to bet on with conviction, but I will be very surprised if blockchain isn’t a real force in our economy, say 5-10 years from now and not a major disruptor with companies that will have been founded between now and then. It’ll do very well, but it will also challenge things like our financial companies and do a lot of disruption.
“I find crypto interesting. My 69th birthday is in a couple weeks. I’m probably too old to compete… with the young people in this space, but I’m certainly monitoring it.“
Bitcoin vs Gold
“Nasdaq type risk play takers are the ones that stand to play in Bitcoin and curmudgeons that are gold bugs [are] playing gold… If you believe we’re going to have irresponsible monetary policy and inflation going forward, if it’s in a bull phase, you want to own Bitcoin, but if it’s in a bear phase for other assets, you want to own gold.“
