Howard Marks Issues a Mea Culpa on Bitcoin, But He’s Still Not Investing

Billionaire investor Howard Marks, who ignited a fierce backlash from cryptocurrency advocates after dubbing bitcoin a “fad” in July, has a had change of heart. Well, sort of.

Photographer: Christopher Goodney/Bloomberg

Bitcoin, in fact, boasts a key attribute that may spur the digital method of exchange to serve as an alternative to legal tenders and as a store of value in the years to come: the simple fact that people believe in it.

“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,” the Oaktree Capital Group LLC co-chairman wrote in a client memo Thursday.

There’s no obvious reason why government-issued fiat currencies are superior to digital currencies, he adds. “So my initial bottom line is that I see no reason why bitcoin can’t be a currency” given the fact “there are people (and businesses and even countries) that accept it as a legal tender.”

The mollifying tone contrasts his summer missive, when he lamented excessive speculation across markets, from bitcoin to technology stocks. “Digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it,” he wrote in July.

Before bitcoin fans rejoice: Marks, who co-founded Los Angeles-based Oaktree in 1995 and has grown it to manage $100 billion, isn’t bullish on the digital currency as an investment.

“Think about the fact that the price of bitcoin has risen more than 350% so far this year and 3,900 percent in the last three years,” Marks writes. “You might want to consider whether a real currency can do that, or whether speculative buying is determining bitcoin’s price.”

Competition from other currencies and transaction systems also threatens bitcoin as a payment mechanism, while there’s a natural cap on its appreciation since it may become too pricey for day-to-day transactions, he adds.

“Thanks to the people who took the time to educate me,” Marks wrote. “But I still don’t feel like putting my money into it, because I consider it a speculative bubble. I’m willing to be proved wrong.”