David Einhorn, the President of Greenlight Capital, recently spoke at the 14th CNBC Delivery Alpha Investor Summit in New York City. He expressed his concern about the level of speculative activity in the current bull market, which he believes has surpassed rationality.
Einhorn mentioned in a letter to investors that was later obtained by CNBC, “We have reached the ‘Fartcoin’ stage of the market cycle. Apart from trading and speculation, it doesn’t seem to serve any other purpose or meet a need that isn’t already fulfilled elsewhere.”
The crypto token “fartcoin” has gained massive popularity, especially following the recent re-election of Donald Trump which has stirred up the market. This meme coin is now close to having a market value of $2 billion, surpassing numerous US-listed companies.
Following fartcoin, more meme coins have surfaced. Trump has launched $TRUMP, a meme coin on the Solana platform, which over the weekend saw its market cap surpass $14 billion. Despite experiencing a dip of more than 20% at one point in the last 24 hours, it managed to reduce its losses to around 3%. Melania Trump, the former president’s wife, has also introduced a coin.
Einhorn further commented, “Nothing is preventing the introduction of many more tradable coins. Maybe we are moving from the Fartcoin phase of the market to the Trump (and Melania) memecoin phase. It’s hard to predict what will happen next, but it certainly seems like it’s going to be a wild ride.”
This letter from Einhorn comes at a time when investors are pushing equities higher, propelled by hopes for lower taxes and deregulation from Trump’s second administration. The Dow Jones Industrial Average rallied by more than 400 points the day after the inauguration, while the S&P 500 and Nasdaq Composite climbed by 0.8% and 0.7% respectively.
In another development, Greenlight Capital took advantage of the frenzy around crypto in the fourth quarter by betting against some popular exchange-traded funds indirectly linked to bitcoin. The firm focused on the T-Rex 2X Long MSTR Daily Target ETF (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX), which use derivatives to aim for twice the daily returns of MicroStrategy. This software company has recently transformed itself into a bitcoin treasury vehicle.
However, these funds have sometimes struggled to achieve their goal due to the volatility of MicroStrategy and the scarce supply of the most easily used derivatives for leveraged returns. The letter revealed that Greenlight took short positions against these funds during the quarter, which was partially offset by owning MicroStrategy stock, resulting in a significant win.
