Short selling is good for all markets, including crypto: Jim Rogers

With so-called stablecoins under a cloud of last month’s multi-billion dollar collapse of stablecoin TerraUST, Forkast spoke to Singapore-based investor and financial commentator Jim Rogers for his perspective on these types of coins as well as the relevance of short sellers in the cryptocurrency market.

The former Quantum Fund and Soros Fund Management co-founder said most governments wouldn’t allow stablecoins given the lack of control over money flows. Short sellers are good for crypto markets because they make price discovery easier, Rogers said.

(The following interview with Forkast’s Lachlan Keller has been edited and condensed.)

Lachlan Keller: Did you follow the story of Terra Luna? What do you do with it?

jim rogers: I’ve followed far enough to know that it’s been a disaster for a lot of people. Other people apparently lost a lot of money. I don’t have a job. Long or short either way. So I neither won nor lost any money on it.

This does not surprise me. As you probably know, many cryptos have already disappeared and gone to zero. And I’m sure there will be many more who will disappear. In the end, it always happens when something new happens.

I don’t know if you remember the dawn of the Internet. Many hot stocks disappeared 20-25 years ago. They had gigantic valuations, but disappeared. The same will happen. It has happened before with cryptos and more will come.

Keller: What do you think the people of Terra could have done differently to avoid this situation?

roger: Hindsight is wonderful. I have no idea. You could do an entire column or an entire chapter on what they could have done better. But it’s not just them. I mean, a lot of them are already gone.

I haven’t done enough research to know the underlying theme of those who disappeared versus those who survived. But I’m sure someone like you or your publication will understand that.

Keller: Well, we certainly hope to get to the bottom of it. Do you think stablecoins – cryptocurrencies pegged to an underlying asset – are a viable form of money? Do you believe in them?

roger: In my opinion, none of them are viable other than maybe as commercial vehicles.

And if they’re just trading vehicles, that’s fine, as long as people want to trade them and make money and as long as the underlying assets are real and solid. But if they become currencies, or threats as currencies, which they say they will, I doubt most governments will allow that.

Almost every government in the world is currently working on cryptocurrency, including the United States. But I don’t think the United States is saying, okay, it’s money now, but if you want to use that money there, you can. This is not how governments think. That is not how bureaucrats think. They love power. They like control. I don’t like it, but they like control.

Historically, most governments are unlikely to give up control of money. But as long as they fight, who cares?

Keller: In your opinion, what is important for projects like this to succeed and avoid certain pitfalls?

roger: Well, throughout history there have been a lot of new things that have come up and those that are well capitalized, that have more assets and liabilities, that aren’t overstretched, that don’t s who don’t have too much debt and who have too much of anything they promise, they outlive others.

History is full of people going bankrupt and overworking themselves and losing everything.

The story is very, very clear – just make sure you are well funded and not overstretched. Whatever you do, whether you grow cotton or have a cryptocurrency.

Keller: Although you were not involved in any major way in the sterling short circuit in the early 1990s, is there an idea you might have that we could learn from?

roger: Well, I and many others have shorted many currencies throughout history.

We are not the first to invent anything short when a currency or anything gets overloaded and expectations get too high. They always collapse, especially if there is a lot of debt involved.

I wasn’t around when the (short) pound came along, but I already shorted the pound in the 70s and made some money.

Anyone with fragile finances, regardless of the product, is going to have a problem. And you already asked about cryptos; history will show that some of them will disappear. Maybe all of them will fade away, especially the overstretched ones.

It’s something that I hope everyone’s parents have taught them. If you go into too much debt, you will suffer a lot. If your parents didn’t teach you, call them and go visit them tonight.

Keller: This is probably good life advice. But there is still a debate about the importance of short sellers in the ecosystem, depending on who you are. What do you think of short sellers and their role?

roger: Well, short sellers are good for any market that comes along. If something really gets wildly priced, short sellers step in and stop it from going too high.

It may go too high, but at least (short sellers) temper the upside. If they are wrong, they simply drive the market up because they need to cover (their short positions).

And on the other hand, if and when whatever item (is shorted) breaks down, short sellers must buy. So that prevents it from dropping too much because if it goes from 10 to 2, short sellers come in and buy and it doesn’t go to one. Short sellers do it, just go two.

Thus, short sellers temper both upside and downside moves. Whether they are right or wrong. Short selling is therefore good for the markets.

Many don’t understand short selling or what short sellers do.

There was a president in the United States named Richard Nixon. He couldn’t understand it. He thought it must be illegal because he never really understood what short selling was. We had another president named (Dwight) Eisenhower who didn’t even know this existed. He didn’t know what it was. So, I mean, these are top people in America. And short selling is not understood by most people. And even people who understand it, many of them are wrong.

Keller: When it comes to the crypto market, does it need short sellers or hedge funds making calls on both sides of the equation? I guess what you’re saying probably applies to the crypto industry, but do you have any particular insights?

roger: It ripples through any market, be it lumber, cotton, cryptos or stocks with a coin, whatever it is. Short sellers are good.

Short selling adds liquidity to a market. It attracts new players, buyers and sellers. Short selling is therefore good for all markets where it exists, including the crypto market.

I don’t know how many short sellers there are, if there are still any, but if there are, they will be good for the crypto market.

Keller: Thank you for sharing your views on short selling in the crypto market. Is there anything else you would like to cover before we conclude?

roger: [Facts are one thing but] the judgment is different; it doesn’t matter what market we’re talking about with a lot of people.

If 100 people walk into a room and all hear the same facts, only 5 or 6 of them will make the right judgment and do it right. And that applies to crypto, applies to everything.

Unfortunately, human beings are human beings. And we all make many, many mistakes.

But by the way, anyone who listens to crypto stories and reads your post, just help them to hopefully judge well. Judging is the hardest part. We can all know facts.

So try to help them get the right judgment. And I repeat, short selling is good. This adds liquidity. It adds judgment. It adds everything to any market where it exists.

About Ellie Cohn

Check Also

Crypto Turmoil Intensifies as Major Fund Defaults

The turmoil in the cryptocurrency market intensified with news on Monday that major crypto hedge …