“Bitcoin is a limited supply of nothing”: John Paulson warns of AI bubble and French debt crisis
The billionaire investor, who made billions betting against the U.S. housing market before the 2008 financial crisis, says inflated technology valuations could trigger a market correction, while mounting debt in France poses a risk to the eurozone. He sees gold as a long-term store of value as confidence in fiat currencies comes under pressure.
“Bitcoin is nothing. It’s just like all other cryptocurrencies. While the supply is limited, it is a limited supply of nothing,” says American billionaire investor John Paulson, offering a blunt assessment of the world’s best-known cryptocurrency.
Paulson, who made a fortune betting against the U.S. mortgage market ahead of the 2008 financial crisis, remains unconvinced by Bitcoin’s claim to be a store of value. Its price, he argues, rests entirely on demand rather than on an underlying asset with a long-established monetary role.
“I estimate that 99% of the cryptocurrencies issued since this craze began have effectively become worthless. I believe that, over time, the same will happen to Bitcoin,” he says in an interview with Calcalist.
Paulson’s skepticism toward cryptocurrencies is part of a broader investment outlook shaped by concerns about debt, asset valuations and the long-term purchasing power of money. He sees two major sources of risk in the global economy: a potential debt crisis in France and excessive valuations among U.S. technology and artificial intelligence companies. Against that backdrop, he expects gold to retain its appeal as an alternative to paper currencies.
“Globally, my biggest concern is a debt crisis in France,” Paulson says.
He points to the eurozone’s experience during the Greek debt crisis, when turmoil in a relatively small economy threatened financial stability across the currency bloc. France, he argues, presents a potentially more serious challenge because of its size and financing needs.
“We previously experienced a debt crisis in Greece, a country much smaller than France, and that crisis caused instability throughout the entire eurozone. France is larger than Greece. Should a debt crisis occur there, containing it would be extremely difficult.”
Paulson contrasts France’s position with that of the United States. Both countries face substantial public debt and budget deficits, he says, but the U.S. has advantages that France does not.
“The U.S. also has a high debt-to-GDP ratio, around 100%, and a large deficit, about 6%. But the U.S. economy is growing, with projected growth of roughly 2.3%, which could help reduce the debt-to-GDP ratio. Furthermore, the U.S. borrows in a currency it issues itself.”
That gives Washington greater flexibility in a crisis, Paulson argues, including the ability to finance itself through monetary expansion and central-bank purchases of government bonds. France, by contrast, uses the euro, which it cannot issue unilaterally.
“France lacks this capability. It does not borrow in its own currency, but rather in the European currency, the euro. Its national central bank cannot independently issue euros to purchase French government bonds. Consequently, France is compelled to borrow from the markets.”
Paulson estimates that France will need to raise approximately $400 billion over the coming years and questions whether markets will be able to absorb that borrowing without putting further pressure on government bond yields.
“It will be difficult for the markets to absorb this debt. The yield on French bonds is reaching historic levels relative to those on German bonds.”
In his view, France has limited room to address the problem. Cutting spending or raising taxes are the conventional options, but both carry political and economic costs.
“France already imposes very high tax rates. Further tax hikes could stifle the economy. On the other hand, previous attempts to cut spending have consistently triggered unrest and turmoil. Recent presidents have seen their popularity plummet because they attempted to implement such cuts.”
The political difficulty is compounded by public demands for greater spending rather than austerity, he says. That leaves France facing a difficult choice between measures that risk weakening growth and policies that could leave its debt burden increasingly difficult to manage.
Paulson sees a correction coming for U.S. technology stocks
France is not the only source of risk on Paulson’s radar. He is also concerned that investors have pushed valuations of U.S. technology and AI companies too far ahead of their underlying businesses.
“The high valuations of American technology and artificial intelligence companies” are his second major concern, he says. While some companies may justify high valuations through rapid growth, he sees others benefiting primarily from enthusiasm surrounding the sector.
“While these high valuations might be justified in some cases by rapid, robust growth, there are too many companies with inflated valuations that are simply ‘riding the wave’ without any underlying economic foundation.”
Paulson believes the gap between market prices and economic fundamentals could eventually narrow through a market correction.
“I believe current valuations are somewhat ahead of the underlying economic fundamentals. Therefore, given rising bond yields, high valuations and the volume of debt raised, I expect to see a market correction in the U.S. in the coming years.”
His warning reflects concern about the combination of expensive assets, rising financing costs and the volume of capital being committed to technology. Even where growth is strong, he suggests, investors may be paying prices that leave little room for disappointment.
Paulson does not identify specific companies he believes are overvalued, nor does he offer a timetable for a correction beyond saying he expects one in the coming years.
Gold occupies a different place in Paulson’s investment outlook. His exposure includes direct investments through exchange-traded funds and holdings in gold-mining companies. He is reluctant to make a specific price forecast, but expects the metal to continue appreciating as investors and central banks seek alternatives to fiat currencies.
“I think the U.S. will struggle significantly to cope with current inflationary pressures, so I expect gold to continue appreciating,” he says.
His concerns about the euro are even more fundamental. If confidence in the currency erodes over the long term, he argues, demand for gold could rise substantially.
“As for the euro, the question is more existential: Will it survive in the long term? If the answer is no, I believe demand for gold will rise dramatically.”
For Paulson, gold’s appeal rests on its long history as a monetary asset and on demand that extends beyond private investors. Central banks, he notes, have also been buying gold as an alternative reserve asset.
“If you lose faith in paper money, whether in the dollar because so much is being printed or in the euro because of instability, where would you feel safe placing your long-term savings? In gold, which has served as currency throughout recorded history.
“And right now, we see that demand for gold is not coming just from the private sector. It is also coming from the public sector, from central banks. The demand for gold as an alternative currency will persist.”
That view helps explain his sharp distinction between gold and Bitcoin. Both have limited supplies, but Paulson sees scarcity alone as insufficient to establish lasting value. Gold, in his view, has a history of monetary use and demand that spans centuries; Bitcoin does not.
“I’ve just returned from a visit to the Israel Antiquities Authority, where I saw its coin collection. It has gold coins dating back to the Byzantine Empire and even earlier. Gold has always been a global currency.”
Bitcoin, he argues, lacks that foundation. Its value depends on buyers continuing to believe that others will be willing to pay for it, leaving it vulnerable if sentiment changes.
Paulson’s views come from an investor whose reputation was built on one of the most consequential trades of the 2008 financial crisis. His fund reportedly earned approximately $15 billion by betting against the U.S. mortgage market, while he personally made about $4 billion. He has not replicated that success on the same scale since, but his current outlook is rooted in a familiar investment question: whether market prices adequately reflect the risks beneath them.
His answer is that, in several areas, they may not. He sees sovereign debt threatening to become a greater source of instability, AI enthusiasm pushing some companies beyond what their fundamentals justify, and gold retaining its appeal if confidence in currencies weakens. Bitcoin, by contrast, remains an asset whose scarcity he does not believe is enough to sustain its value over time.
