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David Einhorn, President of Greenlight Capital, speaking at the 14th CNBC Delivery Alpha Investor Summit in New York City on November 13, 2024.
Adam Jeffery | CNBC
David Einhorn of Greenlight Capital believes that speculative behavior in the current bull market has risen to a level that goes beyond common sense.
“We have reached the ‘Fartcoin’ stage of the market cycle,” Einhorn wrote in a letter to investors obtained by CNBC. “Other than commerce and speculation, it serves no other obvious purpose and fills no need not found elsewhere.”
A crypto token called “fartcoin” exploded in popularity when Donald Trump’s re-election unleashed a storm of animal spirits on Main Street. The meme coin is now approaching a market value of $2 billion, surpassing many publicly traded companies in the United States.
More meme coins have emerged since the inception of fartcoin. President Donald Trump launched $TRUMP, a meme coin created on the Solana platform. Its market capitalization rose over the weekend. passed $14 billion. At one point, the coin was down more than 20% in the last 24 hours, but has since narrowed its losses to around 3%. Trump’s wife, Melania, too sleepless a coin
“Nothing is stopping the release of many more tradable currencies,” Einhorn said. “Maybe we are leaving the Fartcoin market stage and entering the Trump (and Melania) memecoin stage. Nobody knows what will happen next, but it looks like it’s going to be crazy.”
Einhorn’s letter comes as investors push stocks higher, buoyed by expectations of lower taxes and deregulation by the second Trump administration. On Tuesday, the day after the inauguration, the Dow Jones Industrial Average recovered more than 400 points. He S&P 500 and Nasdaq Composite they rose 0.8% and 0.7%, respectively.
Shorting leveraged bitcoin ETFs
Greenlight took advantage of the craze around cryptocurrencies during the fourth quarter by betting against some popular ETFs indirectly linked to bitcoin.
The two funds the company focused on were the T-Rex 2X Long MSTR Daily Target ETF (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX). Those funds use derivatives to try to achieve twice the daily returns of microstrategy, a software company that has become a bitcoin treasury vehicle in recent years.
Funds have at times struggled to achieve that goal due to MicroStrategy’s volatility and low supply of the derivatives that are most easily used to earn leveraged returns.
The letter said Greenlight took short positions against those funds during the quarter, partially offset by holding MicroStrategy shares in an arbitrage trade that was a “material winner.”
