Greenlight Capital’s David Einhorn believes that speculative behavior in the current bull market has escalated to a level that defies common sense. In an investor letter obtained by CNBC, Einhorn described the market as being in the ‘Fartcoin’ stage, where trading and speculation are the primary activities with no clear purpose or need being fulfilled.
The rise of a crypto token named “fartcoin” gained significant popularity following the recent election of Donald Trump, leading to a surge in its market value to nearly $2 billion, surpassing the valuations of many U.S.-listed companies. Subsequently, other meme coins like $TRUMP, launched by Trump on the Solana platform, also gained traction, with its market cap exceeding $14 billion over the weekend. Melania Trump also introduced her own coin into the mix.
Einhorn expressed concerns about the proliferation of tradable coins, suggesting a transition from the Fartcoin era to the Trump (and Melania) memecoin phase, anticipating further unpredictable developments in the market.
Amidst the market exuberance, equities continued to climb higher, driven by optimism surrounding potential tax cuts and deregulation under the second Trump administration. Following the inauguration, the Dow Jones Industrial Average surged more than 400 points, while the S&P 500 and Nasdaq Composite rose by 0.8% and 0.7%, respectively.
During the fourth quarter, Greenlight Capital capitalized on the crypto frenzy by taking short positions against popular exchange-traded funds indirectly linked to bitcoin. Specifically targeting the T-Rex 2X Long MSTR Daily Target ETF (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX), which aim to replicate double the daily returns of MicroStrategy, a company heavily invested in bitcoin. Greenlight’s strategy involved shorting these funds while holding MicroStrategy stock in an arbitrage trade that proved to be a successful move.
