As cryptocurrency prices plummet, institutional investors believe Ethereum will eventually surpass Bitcoin

Billionaire investor Stanley Druckenmiller recently explained why he only invested $20 million in Bitcoin (BTC) but is skeptical of Ethereum (ETH).

“During the first move of Bitcoin — I think from about $50 to $17,000 — I just sat there dumbfounded. I wanted to buy it every day. It was going up, and even though I didn’t think too much about it, I just couldn’t stand the fact that it was going up and I didn’t own it,” Druckenmiller said in an interview with the Hustle earlier this week.

Druckenmiller and the story of Bitcoin

A few years ago, Druckenmiller famously said that Bitcoin was “a solution in search of a problem.” However, since then, he has “evolved on the problem” due to several things that have happened. First, he finally realized what problem Bitcoin was aiming to solve — and that problem is called “central banking.”

He said: “I saw the problem: When we implemented the FESA, Chairman Jay Powell started crossing all kinds of red lines in terms of what the Fed would and would not do. The problem is Jay Powell and the central banks of the world went crazy and made fiat currencies even more problematic than they were when I owned gold.”

Eventually, when the price of Bitcoin rose from $50 to $17,000, Druckenmiller, who never owned any Bitcoin, "felt like an idiot." Then, another billionaire, Paul Tudor Jones, called him and said, "You know, when Bitcoin crashed from $17,000 to $3,000, 86% of the people who held it at $17,000 never sold it."

“Well, that’s a big deal in my mind. This is a limited supply thing, and 86% of the owners are religious fanatics. Who has $17,000 to $3,000 of something? And it turns out that 86% of them didn’t sell it,” Druckenmiller noted. “On top of that, there’s this new craziness of central banks.”

Finally, he planned to buy $100 million worth of Bitcoin at around $6,200, but ran into some problems and ended up buying only $20 million. "It took me two weeks to buy $20 million. I think I averaged about $6,500 per Bitcoin. I said, 'This is ridiculous.' You know, it took me two weeks. I could have bought that much gold in two seconds," he added ruefully, "so I stopped buying like an idiot. The next thing I know, the price (of Bitcoin) is at $36,000."

Ultimately, Druckenmiller “gave some money and took some money back” from his Bitcoin investment — but he still holds an “undisclosed amount” of Bitcoin.

Ethereum’s future is uncertain

Speaking about Ethereum and other cryptocurrencies, Druckenmiller believes that Bitcoin will be "very, very hard to shake" as the ultimate store of value asset. "I think Bitcoin wins the store of value game because it's a brand, it's been around for 13-14 years, and it's finite in supply. Will it become gold? I don't know. It's certainly mimicked it very well over the last year or two," he noted.

Meanwhile, Druckenmiller praised Ethereum as a “commerce facilitator” and the leading smart contract platform. However, the billionaire said he is “a little skeptical it can hold its own.”

"It reminds me of MySpace before Facebook. Or a better analogy would be Yahoo before Google. Google wasn't that much faster than Yahoo, but it didn't have to be. It just had to be a little bit faster, and the rest is history."

Furthermore, he believes that a completely new and better payment system may emerge in the future, and “it’s possible that it hasn’t even been invented yet.” In the meantime, Bitcoin will likely continue to be seen as a store of value similar to gold.

“As long as Jay Powell continues to behave as he has, I think gold and Bitcoin (Bitcoin appears to be the riskier alternative to gold) will be supported,” Druckenmiller noted.

“I Pretend DOGE Doesn’t Exist”

On the other hand, the Dogecoin (DOGE) wave did not cause any serious thinking for Druckenmiller, who believes that Dogecoin is just part of "this wave of money in the Greater Fool Theory" despite numerous endorsements from billionaires such as Elon Musk or Michael Saylor.

He also said, "Having said that, I won't short it because I don't like putting out bonfires with my face. So I just pretend Dogecoin doesn't exist. I think very little about it, and even when it rises sharply, it doesn't bother me." Similarly, he compared Dogecoin to the booming non-fungible tokens (NFTs) because "it is the embodiment of the craziest monetary policy in history."

Druckenmiller concluded: “And I think that since the supply of Dogecoin is unlimited, I really don’t see its utility right now. When Bitcoin goes up, I get mad because I don’t own it. But when Dogecoin goes up, I start laughing.”

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