Hedge fund giant Klarman trashes bitcoin, says cryptocurrencies are ‘tulip bulbs for the digital age’

Key Points
  • Baupost's Seth Klarman says the volatility of cryptocurrencies detracts from their ability to be a "medium of exchange."
  • "Cryptocurrencies seem more like tulip bulbs for the digital age," he writes in a letter to clients.
Seth Klarman, founder of the Baupost Group
Scott Eells | Bloomberg | Getty Images

Seth Klarman, the value investing giant who draws comparisons to Warren Buffett, says he is not a believer in cryptocurrencies.

"While we have long had our own concerns over the tendency of central bankers to debase paper currency by printing more and more of it, the proliferation of hundreds of virtual currencies seems far more likely to be a craze," Klarman wrote in a recent investor letter obtained by CNBC. "Cryptocurrencies seem more like tulip bulbs for the digital age."

He was referring to a Dutch speculative trading bubble over tulip bulbs during the early 1600s.

Klarman said the surging prices and volatility of cryptocurrencies detract from their ability to be a true "store of value or a medium of exchange."

Despite recent volatility the price of bitcoin is up more than 1,100 percent in the past 12 months and now trades at nearly $11,000, according to Coinbase.

Klarman's comments on digital currencies on Jan. 11 came after he told CNBC in December he considered bitcoin a "trading sardine" for speculators.

The hedge fund manager is revered in value-investing circles for his disciplined investing philosophy. Used copies of his investing book "Margin of Safety" still sell for nearly $700 online.

Baupost did not immediately respond to a request for comment.

The firm generated midsingle-digit return in 2017, according to the investor letter. Baupost had $30 billion of assets under management as of March.

— CNBC's Michael Bloom contributed to this story.


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