Cryptocurrency billionaire and Dallas Mavericks owner Mark Cuban says the current market downturn reminds him of a famous adage uttered by Warren Buffett.
Cuban sees a parallel between the rise and fall of crypto markets and projects, and the aphorism of the 91-year-old Oracle of Omaha is: “Only when the tide subsides will you discover who has been swimming naked.”
Cuban’s observation was revealed during an interview with Fortune on Thursday, in which he discussed what he sees as the flawed business models of some crypto projects that have fallen on hard times over the past two months.
“In stocks and cryptocurrencies, you will see companies that were held on to cheap, easy money but had no real business prospects disappear,” investor Shark Tank said:
“As [Warren] Buffett said, ‘When the tide goes down, you’ll see who’s swimming naked.’
Among the companies that floated naked were Terra, Celsius and Three Arrows Capital.
The Terra ecosystem, now known as Terra Classic, had completely collapsed by mid-May. The fallout from this crash resulted in tens of billions of dollars in losses for investors, while several regulators sought out founder and CEO Do Kwon.
Celsius, the betting and lending platform, is struggling to stay solvent if its recent suspension of withdrawals is any indication. Investment firm Three Arrows Capital reportedly faced a $400 million liquidation and failed to meet margin calls.
Despite the gloomy near-term outlook for crypto, Cuban said that these downturns tend to have a cleansing effect on the market and that this time around, the same is likely to be true for crypto. But, he says, you should always support innovation:
“Disruptive applications and technologies released during a bear market, whether it be stocks, cryptocurrencies, or any other business, will always find a market and succeed.”
Mark Lasry, CEO of Avenue Capital Group, is even more gloomy about financial markets. On Bloomberg TV, he predicted that the problems in the economy as a whole will continue until the end of 2022, as stock indices could fall another 10%. However, Lasry believes that the United States economy is strong enough to moderate the current recession relatively.
Lasri has been a cryptocurrency bull since 2018. In 2021, Cointelegraph reported that he lamented not buying enough bitcoin (BTC). But he told Bloomberg TV that BTC and Ether (ETH) have already fallen more than expected and that “no one knows where the bottom is for this.”
He added that even professional investors find it hard to spot a bottom, “so you want to invest when you can.”
Related: 72 of the top 100 coins fell 90% or more: here’s the hold