Bitcoin BTC/USD, the world’s largest — and first — decentralized cryptocurrency, will quadruple in value if the sector gets regulated, according to Shark Tank's Kevin O'Leary in an exclusive interview with Benzinga.
O'Leary, a renowned capital investor and entrepreneur in his own right, went on to discuss a variety of topics including the purging of “bad businesses” and the ongoing bear market, which he calls "a blip."
"Extraordinary outcomes take time," he says.
“A bottom is usually created when there is a catastrophic event like a large player going bankrupt or somebody is in deep trouble for buying crypto on over leverage. When such an event occurs, markets will bottom out. Until then, there is no bottom,” O'Leary said.
Events like the collapse of companies like Voyager Digital, which went bankrupt earlier this month, “don’t matter,” he added. "When a big catastrophic event happens, it is going to be really ugly."
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The over-leverage has not been shaken off the market as yet and therefore, there is more pain in the future.
“Since there are no regulations in place, we don’t know who will blow up when," O'Leary said. "However, a positive is that when damage hits, the damage is diversified in terms of multiple countries being involved and multiple entities being in the picture. But the downsides overweigh the positives."
When it comes to regulating the crypto sector, O'Leary explained how that could bring stability, as well as attract institutional investors to asset classes like non-fungible tokens (NFTs), stablecoins and cryptocurrencies.
“The best thing is to start with regulating stablecoins," he said. "That will be a big encouragement for investors. Cryptos won’t recover until there are concrete policies as currently, there is no ownership with sovereign wealth managers or asset managers. Therefore, there just isn’t enough participation for it to be a real asset class."
The U.S. Securities and Exchange Commission will take notice and initiate regulations when more companies go bankrupt and more investor money is lost, O'Leary predicts.
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Asked to comment on the pains being incurred by crypto companies in terms of hits to bottom line numbers, liquidations, and bankruptcies, O'Leary said this is a nascent industry and the purging of companies is a healthy sign.
“What is happening with these companies is not surprising. Weak business models, management, and managers that don’t understand the asset class in the first place are being purged and the market is getting rid of idiotic management," he said. "Only when the idiots are out can an industry come out stronger. We should be celebrating this purging."
Crypto also has plenty of critics, including billionaires Warren Buffett and Charlie Munger. But there are always critics in a new asset class, O'Leary says.
“They have great success, does not mean they are right on cryptocurrencies," O'Leary added. "The productivity, transparency and efficiency of blockchain are immense in the long term. The other way to look at this is this — there will be unprecedented institutional capital in cryptocurrencies. The current bear market is just a blip. Extraordinary outcomes take time.”
Citing an analogy of e-commerce giant Amazon.com Inc. AMZN, O'Leary said since being listed, the company's stock has seen 38-50% depreciation, but good management ensures that such downsides are temporary.
As for the value of Bitcoin over the next two years, O'Leary says: “It will trade above what it is today. I am more concerned about having regulations in place so that individuals can buy cryptos as regulated security, like a Bitcoin ETF. Once regulations are in place, the price of Bitcoin will quadruple.”
Kevin O'Leary speaks at the Benzinga Cannabis Capital Conference in April 2022. Photo by Dez Smith.
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