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- Jeremy Grantham said bitcoin is the asset that most resembles the Nasdaq during the 2000 dot-com bubble, according to an interview with Bloomberg.
- "Cryptocurrencies total over $1 trillion of claims on real global assets while adding nothing to the GDP pool — pure dilution," Grantham said.
- The market historian said bitcoin should be avoided in portfolios and does not serve as a viable hedge to a traditional 60/40 stock & bond portfolio, according to the interview.
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A wide-ranging Bloomberg interview with market historian Jeremy Grantham on Tuesday revealed his view that bitcoin is in a bubble similar to the dot-com frenzy of the early 2000s.
Grantham opined on the 50% decline in bitcoin over the past two months and likened it to the fast and furious drop of the Nasdaq 100 during the unraveling of the dot-com bubble in 2000.
"Probably the asset that most resembles the Nasdaq in 2000 is bitcoin, and it has been cut in half over the last several weeks. In 2000, the Nasdaq crashing 50% was a perfect warning shot for the broad market six months in advance," Grantham said, alluding to the idea that the recent decline in bitcoin could signal an upcoming decline in the broader stock market.
While he says bitcoin is in a bubble, Grantham also doesn't view the popular cryptocurrency as a viable hedge to traditional stock and bond portfolios. Many crypto bulls have praised bitcoin's lack of correlation to other asset classes as reason why investors should include an allocation to it in their portfolios.
But according to Grantham, "bitcoin should be avoided" as it's not a viable hedge. The same goes for dogecoin and other cryptocurrencies that were created as a joke.
"Dogecoin was created as a joke to make fun of cryptocurrencies being worthless, and not only has it taken off, but it's such a success that second-level joke cryptocurrencies making fun of dogecoin have gone to multibillion-dollar valuations. Meanwhile, other cryptocurrencies have seen success purely on the basis of their scatological names," Grantham said.
"Cryptocurrencies total over $1 trillion of claims on real global assets while adding nothing to the GDP pool — pure dilution," Grantham added.
Grantham doesn't think bitcoin is the only bubble out there. In the interview, he detailed why he thinks the stock market is in a bubble following the swift pandemic recovery, and outlined when and how he'd begin buying stocks again.
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