Valuation Guru and NYU Professor Discusses Cryptocurrency and Tech Sector Rally
Cryptocurrency Skepticism
Aswath Damodaran, a renowned valuation guru and Professor at Stern School of Business at New York University (NYU), recently shared his insights on the cryptocurrency market and the historical rally in the tech sector. He expressed skepticism regarding the adoption and behavior of cryptocurrencies, particularly Bitcoin.
In a podcast with NYU Professor Scott Galloway, Damodaran remarked, “Bitcoin is the currency that nobody uses and a collectible that doesn’t behave like a collectible.” He highlighted the volatility and inconsistency in Bitcoin’s behavior, noting its deviation from traditional investment principles. The professor also questioned its role as a hedge, stating, “It’s gone up as stocks have gone up, it goes down when stocks go down. This is not the way a collectible is supposed to behave.”
Tech Sector’s Historic Rally
During the conversation, Damodaran also provided his perspective on the tech sector’s historic rally in the first half of the year. He noted that the rebound was driven by a concentration of larger tech companies that are profitable, distinguishing it from the risk capital influx observed in previous years.
“It looks like a tech comeback, but it’s a very different comeback than the drawdown we saw last year. It feels like animal spirits are coming back into the markets. There’s some of that and some of the recognition that these big tech companies have incredible amounts of buffer, that’s what we realized last year that you could lay off 10,000 employees without a dent to your revenues,” Damodaran explained.
He emphasized the importance of recognizing the companies’ resilience, stating, “They built up a lot of fat on the way up. I think that these tech companies have had an incredible amount of fat to burn off and as they’ve burnt it off, the markets have recognized they still stay profitable and deliver the margins they used to with a lot fewer people employed.”
As a valuation expert, Damodaran’s commentary on the cryptocurrency market and the tech sector rally provides valuable insights for investors and industry professionals alike. His skepticism towards Bitcoin and his analysis of the tech sector’s resurgence offer a unique perspective on these noteworthy market developments.
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