David Einhorn believes we are currently in the "Fartcoin" phase of the market cycle.
- According to Einhorn's investor letter, obtained by CNBC, we have reached the 'Fartcoin' stage of the market cycle.
- He stated that the purpose of trading and speculation is not evident, and it does not fulfill any need that is not already met elsewhere.
David Einhorn of Greenlight Capital believes that the speculative behavior in the current bull market has surpassed reasonable limits.
"According to Einhorn's investor letter, we are currently in the "Fartcoin" stage of the market cycle. This stage has no other purpose besides trading and speculation and does not fulfill any need that is not already served elsewhere."
The popularity of a crypto token called "fartcoin" surged after the re-election of Donald Trump, with its market value nearing $2 billion, surpassing many U.S.-listed companies.
Since the creation of fartcoin, more meme coins have been introduced. President Donald Trump launched $TRUMP, a meme coin constructed on the Solana platform. Its market cap surpassed $14 billion over the weekend. At one point, the coin experienced a 20% decline in value over the past 24 hours, but it has since recovered to around 3%. Additionally, Melania Trump unveiled her own coin.
""Perhaps we are leaving the Fartcoin stage of the market and entering the Trump (and Melania) memecoin stage. It's anyone's guess as to what will happen next, but it feels like it's going to be wild," Einhorn said."
As investors push equities higher, expectations of lower taxes and deregulation from the second Trump administration boost the market. On Tuesday, following the inauguration, the gained over 400 points, while the and rose 0.8% and 0.7%, respectively.
Shorting leveraged bitcoin ETFs
During the fourth quarter, Greenlight capitalized on the frenzy surrounding cryptocurrency by placing bets against certain ETFs that were indirectly linked to bitcoin.
The two funds that the firm concentrated on were the T-Rex 2X Long MSTR Daily Target ETF (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX). These funds employ derivatives to attempt to achieve twice the daily returns of a software company that has transformed into a bitcoin treasury vehicle in recent years.
Due to MicroStrategy's volatility and limited supply of easily leveraged derivatives, the funds have sometimes struggled to achieve their goal.
Greenlight took short positions against certain funds during the quarter, which was partially offset by owning MicroStrategy stock in an arbitrage trade that was a "material winner."
Markets
You might also like
- Delinquencies are on the rise while a record number of consumers are making minimum credit card payments.
- U.S. economy state weighs on little changed treasury yields.
- European markets predicted to sustain positive growth.
- Trump hints at imposing a 10% tariff on China starting in February.
- David Einhorn believes we are currently in the "Fartcoin" phase of the market cycle.