The cryptocurrency market recently plunged after Elon Musk said Tesla would not accept bitcoin payments. Jeffrey Gundlach, founder of Doubleline Capital, known as Wall Street’s “new debt king,” said cryptocurrencies such as bitcoin are a prime example of a market with soaring valuations that it’s like playing for money in a casino.
In an interview with Yahoo Finance, Gundlach reportedly said the cryptocurrency space has become speculative and highly volatile, and also has strong ties to government funding. “Some investors are just messing with the money, and when you give people windfalls that they don’t have to have, they feel like playing with casino money,” Gonlak said.
This phenomenon, as in almost all times of overvalued markets, is followed by a representative example of making a lot of money, according to Gonzalez. In 1999 it was the Internet companies that had no revenue but were very hot in the market, and now I think it’s these cryptocurrencies,” Gonzalez said. The bitcoin peak may only be temporary, and you only see speculative fever when I see them eventually dying out.”
Gonzalez also said the Nasdaq Composite Index is underperforming, which may be another sign that the speculative fever is dissipating. So far this year, the Nasdaq Composite is up just 2 percent and the Dow is up 2 digits. The Nasdaq has long been dominated by the big 6 giants – Facebook, Microsoft, Apple, Amazon, Alphabet, and Netflix, Gonzalez said.
Gonzalez added that the U.S. 30-year Treasury yield is gradually climbing amid the economic recovery and could hit another record high at any time, which is also a risk factor to be wary of.
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