Wirecard shortseller bets against Bitcoin: “At the moment, all crypto currencies are basically worthless”
Fund manager Barry Norris shorted Wirecard after meeting the management of the German fintech in 2018. Argonaut Capital
When the price of the cryptocurrency Bitcoin fell, short seller Barry Norris was delighted as his short position earned him 50 percent return.
Barry Norris founded the hedge fund “Argonaut Capital” in London, where he is a well-known financial markets expert. In 2018, after his first meeting with management, he shorted Wirecard.
In an interview, he breaks down his sales strategy for cryptocurrencies and explains an area of the market that he believes is particularly capable of development.
The day on which the trading platform for cryptocurrencies Coinbase went public turned out to be a historic day for the cryptocurrency Bitcoin (BTC). After an extraordinary 1479 percent price increase since the low point in March 2020, the Bitcoin price reached 54,643 euros that day. However, since then its value began to decline.
Crypto investors complained of an onslaught of fear, uncertainty and doubt as negative news came out after another. The energy-intensive creation of cryptocurrencies, the increasing regulation of the market or even a tweet from Elon Musk could cause uncertainty in the crypto market. Within a few weeks, the price fell to around 28,650 euros and has since struggled to get above 33,700 euros. But one person benefited from this turnaround: the shortseller and CEO of the London-based investment firm Argonaut Capital, Barry Norris.
Barry Norris operates three funds. Its largest fund “Argonaut Absolute Return” has assets under management of 30 million euros. Since it was founded in 2009, the fund has returned 134 percent to investors.
One of Norris ‘most recent successful short positions is that of software company MicroStragety (MSTR), which he has held since February. This has brought him returns of around 50 percent since the share fell from a high of 1,071 euros in February to a low of 380 euros in May. This happened almost simultaneously with the decline in Bitcoin stock. Although Norris has already made a fortune taking the short position, he continues to hold the stock.
Barry Norris plans to continue shorting crypto stocks
“I believe that at least for now, all cryptocurrencies are fundamentally worthless,” said Norris. In explaining why he bet MicroStragety CEO Michael Saylor against the company, he said, “If you will, MicroStragety is basically a failed software company.” He cited two main reasons that led him to make his decision.
Every time Bitcoin falls, Michael Saylor doubles the purchase price on the short positions, Norris said. He even sold bonds to get more money to buy, he added. “The stock market is currently the best way to express an opinion about Bitcoin. The company has invested all of its cash in bitcoin and borrowed a significant amount of money in bitcoin, ”said Norris. “In my estimation, the company will go bankrupt if the cryptocurrency falls.”
2) The MicroStrategy Reward
MicroStrategy trades at a premium on the total value of Bitcoin investments. “Even if [people] don’t share my opinion that the cryptocurrency is fundamentally worthless,” says Norris, “there are cheaper ways to buy Bitcoin without this premium. When a bitcoin fund is started it should attract a lot of people who are currently invested in MicroStragety.
Barry Norris also has short positions on Coinbase and gives three reasons why he will continue to short the stocks.
Graph of Coinbase stock over a year Graph of Coinbase stock over a year Markets Insider
1) Crypto trading is underregulated
Regulation is inevitable, explained Norris. This week, the UK regulator clung to the Binance trading platform and other crypto companies that lack the appropriate anti-money laundering and “know-your-customer” processes. “The fact is, crypto trading is barely regulated compared to stock trading. I think that’s wrong, ”said Norris.
2) The stocks are overvalued
Investors should also look at comparable exchanges to understand how Coinbase is valued, according to Norris. Coinbase has a market capitalization of 45.5 billion euros compared to the Nasdaq at 23.5 billion euros. “If you look at Coinbase’s market capitalization, it’s twice that of the Nasdaq,” said Norris. “That gives you an idea of how overvalued the stocks are compared to something [similar] that is very well recognized and established.”
3) Above average commissions
The average commission for a crypto trade is between 1.5 percent and 2 percent, explained Norris. There are also fees for custody and financing, says Norris. “If you add all of the fees together, the total is almost five percent,” said Norris. Of course, they hope that the value is so volatile that people don’t notice. ”That is a bit of a paradox. Bitcoin is actually supposed to avoid the middleman. Instead, exchanges charge substantial commissions, he said. “It’s the middlemen on the crypto trading platforms that extract huge profits for 99 percent of all crypto transactions,” says Norris.
Real estate instead of crypto
Norris is optimistic about real estate companies in Europe and the US. House prices are booming for a number of reasons. After the 2008 financial crisis, there was almost a decade in which very few houses were built to meet the needs of the population. “The industry actually has to build too much. For a decade, companies would have to build two million houses a year to have enough available, ”says Norris.
In addition, the pandemic means that many more people are working at home, moving away from cities and mortgage rates are very low. “I think US housing is likely to be one of the top performing industries over the next decade,” says Norris.