Howard Marks reassessed his thoughts on bitcoin after starkly warning his clients against the high-flying digital currency in July.
The co-chairman of Oaktree Capital is famous for his prescient investment memos, which predicted the financial crisis and the dotcom bubble implosion.
“There has been particularly spirited response to my comments on digital currencies,” Marks wrote in an investor letter Thursday. “I think I understand what a digital currency is, how bitcoin works, and some of the arguments for it. But I still don’t feel like putting my money into it, because I consider it a speculative bubble.”
Bitcoin’s price is up more 350 percent year to date, according to data from industry website CoinDesk. The digital currency fell 7 percent Friday on a report China may shut down local bitcoin exchanges.
The manager did admit his initial assessment of bitcoin wasn’t complete, when he called it a “unfounded fad (or perhaps even a pyramid scheme)” in his previous letter. He agreed it could be legitimately used as a viable form of payment.
“What bitcoin partisans have told me subsequently is that bitcoin should be thought of as a currency – a medium of exchange – not an investment asset,” he wrote. “Bitcoin fans argue that it qualifies as a currency … it’s something that parties can agree to accept as legal tender and a store of value. That actually seems right.”
On the flip side, Marks pointed out there are “no limits” on the creation of new cryptocurrencies and warned bitcoin may not become the eventual victor. He compared the current digital currency situation to the dotcom bubble period:
“So even if digital currencies are here to stay, who knows which one will turn out to be the winner? Hundreds of e-commerce start-ups appreciated rapidly in the tech bubble based on the premise that ‘the Internet will change the world.’ It did, but most of the companies ended up worthless.”
Oaktree Capital has $99 billion of assets under management as of June 2017, according to its website.