Bitcoin investor says to pay attention crypto currency bubble

Howard Marks, one of the most respected value investors out there, starkly warned his clients to avoid high-flying digital currencies.

Marks, who runs Oaktree Capital and manages around $99 billion in assets, wrote in the investor letter Wednesday.  "In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it."

Ethereum cryptocurrency is up more than 2,300 percent year to date through Wednesday, while bitcoin is up nearly 160 percent this year, according to data from industry website CoinDesk.

The manager then went on to compare cryptocurrencies to the Tulip mania of 1637, the South Sea bubble of 1720 and the internet bubble of 1999.

Bitcoin has more than doubled since the start of the year, and Ethereum is up over 2,300% in that time frame. But Marks isn’t convinced.

“Serious investing consists of buying things because the price is attractive relative to intrinsic value. Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price, solely because they think others will pay more for it in the future.”

Marks has a stellar track record in the financial markets, and has been very prescient in the past with his investing memos. He predicted the financial crisis of 2008-2009, along with the dotcom bubble implosion in the early 2000s.