Oaktree Capital Co-Founder: Digital Currencies Are Pyramid Scheme

Published at: July 28, 2017

Digital currencies have seen a lot of opposition from traditional and entrenched players in the financial services sector. The latest to voice his opposition against Bitcoin is Howard Marks, Co-Founder of Oaktree Capital Management.

Who is Howard Marks?

Howard Marks is a billionaire investor and the co-founder of Oaktree Capital Management, which has ~$100 bln of assets under management. He is a Wall Street veteran, having worked at Citicorp and TCW before founding Oaktree Capital. Marks is famous for his memos to investors at Oaktree, giving insights about investment strategies. He attacks digital currencies in his latest memo.

Strong views on digital currencies

Howard Marks’ strong views on digital currencies primarily stem from his understanding that they are not real.

He admits that he may be a dinosaur and too technologically backward to appreciate digital currencies, but in his view digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), with no intrinsic value.

“But they are not real!!!” is mentioned not once, not twice, but thrice in his article. He goes on to add that this isn’t the first time that bubbles have been built up, starting from Tulip mania in 1637 to the Internet Bubble in 2000.

Howard attacks the backers of digital currencies saying

“...it is my firm view that the ability of these things to gain acceptance is just one more proof of the prevalence today of financial naiveté, willing risk-taking and wishful thinking.”

Not the first obituary for Bitcoin

Howard Marks hasn’t been the first one from the traditional finance sector to attack the valuations and utility of digital currencies and he won’t be the last.

Warren Buffett had called Bitcoin a ‘mirage’ in 2014, stating that he would stay away from investing in it because he doesn’t understand it.

JP Morgan CEO Jamie Dimon had in 2015 stated that Bitcoin would be stopped, because no government would allow a challenge to fiat currencies.

Time has proven these oracles wrong, with countries like Japan recognizing digital currencies and moving to regulate them.

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