David Einhorn Isn't Sold on the Latest Bout of Crypto Mania

The billionaire founder of Greenlight Capital telegraphed his skepticism in his latest letter to investors, arguing that digital assets were approaching a dangerous level of hype.

Billionaire David Einhorn is skeptical about the latest crypto mania, which he says is approaching a dangerous level of hype.

In his latest letter to investors, Einhorn points out the meteoric rise of meme coins like Fartcoin, which soared to a peak market cap of $2.5 billion this month.

"We have now reached the 'Fartcoin' stage of the market cycle," Einhorn wrote on Tuesday, highlighting that the meme coin's only purpose appears to be enabling traders to speculate.

Despite being up by nearly 60% year-to-date, Einhorn added that Fartcoin has no obvious purpose that's not served elsewhere.

The skepticism comes as President Donald Trump announced a $Trump coin late last week, which is described by its website as solely an "expression of support" and not an investment opportunity.

His wife, Melania, also announced her own token launch, with both coins soaring spectacularly before an aggressive sell-off days later that left some investors with big losses.

"Nothing stops the launch of many more tradable coins," Einhorn wrote, adding, "It's anyone's guess as to what will happen next, but it feels like it's going to be wild."

Einhorn also criticized some of the bullish predictions that have propelled bitcoin to records.

Bitcoin bulls entered 2025 eyeing a host of tailwinds that could send the cryptocurrency to fresh highs by the end of the year. They're particularly excited about a strategic bitcoin reserve, which would involve the US government buying and holding the token, to offset rising national debt and inflation.

But Einhorn described a bitcoin reserve as a "dubious" use of taxpayer money that's unlikely to become a reality. Critics are similarly skeptical about financing the effort, with some arguing that the process itself would be inflationary.

"More likely, cooler heads will decide that the government should not borrow another trillion dollars in the bond market to speculate in Bitcoin and that there is, in fact, nothing strategic about doing so," Einhorn wrote.

He's also actively betting against some corners of the market. His letter said Greenlight had opened a short position against two levered ETFs tied to bitcoin's biggest corporate holder, MicroStrategy.

The funds — the T-Rex 2x Long MSTR Daily Target ETF (NYSE Arca: TREX) and the Defiance Daily Target 2X Long MSTR ETF (NYSE Arca: MSTR2) — have become popular in trying to double MicroStrategy's returns.

To do so, they've embraced call options on MicroStrategy, a stock that can be incredibly volatile. This makes options trading unsustainably expensive, Einhorn wrote.

"These products are destined to fail. Over time, they are likely to bleed out their capital," he said. "During the quarter, the Partnerships established a new arbitrage position by shorting these ETFs, which we partially offset by owning MSTR. This position was a material winner in the quarter."

Einhorn isn't alone in his doubts about crypto; other Wall Street heavyweights are similarly unconvinced. This month, the AQR Capital cofounder Cliff Asness said crypto was in a bubble, telling CNBC that it needed to develop use cases beyond "speculation and criminality."

The JPMorgan chief Jamie Dimon has made similar arguments about digital assets. "You know, bitcoin itself has no intrinsic value," he said this month. "It's used heavily by sex traffickers, money launderers, ransomware."

The letter said Greenlight returned 7.2% for investors in 2024, compared with a return of 25% for the S&P 500. Einhorn said that while 2024 was marked by uncertainty about the presidential election, a new Trump administration brings "more uncertainty than ever."

"We know who the President is, but it's anyone's guess as to what he will do," he wrote, adding that economic policy, tariffs, and Trump's mission to shrink government spending were clouding outlooks.