David Einhorn says we have reached the ‘Fartcoin’ phase of the market cycle

Greenlight Capital’s David Einhorn thinks that speculative behavior in the current bull market has risen to a level beyond common sense.

“We have reached the ‘Fartcoin’ phase of the market cycle,” Einhorn said in an investor letter obtained by CNBC. “It serves no other obvious purpose than trade and speculation, and fulfills no need that is not served elsewhere.”

The cryptocurrency “Fartcoin” gained popularity in the recent elections Donald Trump A storm of animal spirits broke out on Main Street. The meme coin is now on its way to a $2 billion market cap, outpacing many US-listed companies.

Since the inception of Fartcoin, more meme coins have emerged. Trump has been activated $TRUMP, a meme coin built on the Solana platform. The market price rose over the weekend 14 billion dollars passed. At one point, the coin lost more than 20% in the last 24 hours, but has since trimmed its losses to around 3%. Trump’s wife, Melania, too opened a coin.

“Nothing prevents more tradable coins from being released,” Einhorn said. “We may be leaving the Fartcoin phase of the market and entering the Trump (and Melania) memecoin phase. What happens next is anyone’s guess, but it feels like it’s going to be wild.”

Einhorn’s letter comes as stocks are buoyed by investors’ expectations of lower taxes and deregulation from a second Trump administration. Tuesday, the day after the inauguration Dow Jones Industrial Average He scored more than 400 points. The S&P 500 and Nasdaq Composite increased by 0.8% and 0.7% respectively.

Shorting used bitcoin ETFs

Greenlight took advantage of the frenzy surrounding the cryptocurrency by betting on some popular exchange-traded funds that are indirectly linked to bitcoin during the fourth quarter.

The two funds the firm focused on were the T-Rex 2X Long MSTR Daily Target ETF (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX). These funds use derivatives to try to double their daily returns MicroStrategy, a software company that has transformed itself into a bitcoin treasure tool in recent years.

Funds have sometimes struggled to achieve this goal due to MicroStrategy’s volatility and undersupply of the derivatives most easily used to generate leveraged returns.

Greenlight took short positions against those funds during the quarter, partially offset by holding MicroStrategy stock in an arbitrage trade that was a “material winner,” the letter said.