David Einhorn claims that we have reached the “Fartcoin” stage of the market cycle.

David Einhorn of Greenlight Capital believes that speculative behavior during the current bull market has reached levels beyond common sense.

“We have reached the 'Fartcoin' stage of the market cycle,” Einhorn wrote in a letter to investors obtained by CNBC. “Other than commerce and speculation, it serves no other obvious purpose and meets no need that would not be met elsewhere.”

The popularity of a cryptocurrency called “fartcoin” skyrocketed as Donald Trump's re-election sparked a storm of animal spirits on Main Street. The meme coin is now approaching a market value of $2 billion, surpassing the value of many U.S.-listed companies.

Since the creation of fartcoin, more meme coins have appeared. President Donald Trump fired $TRUMP, a meme coin built on the Solana platform. Its market capitalization increased over the weekend over $14 billion. Over the last 24 hours, the coin lost more than 20% at one point, but has since narrowed its losses to around 3%. Trump's wife, Melania, too exposed coin.

“There is nothing stopping us from releasing significantly more tradable coins to the market,” Einhorn said. “We may be leaving the Fartcoin market stage and entering the Trump (and Melania) memecoin stage. There's no telling what's going to happen next, but it seems like it's going to be crazy.”

Einhorn's letter comes as investors are driving stock prices higher, buoyed by expectations of lower taxes and deregulation from the second Trump administration. On Tuesday, the day after the inauguration, at Dow Jones Industrial Average accumulated over 400 points. The S&P500 AND Nasdaq Composite increased by 0.8% and 0.7%, respectively.

Shorting Leveraged Bitcoin ETFs

Greenlight took advantage of the cryptocurrency frenzy in the fourth quarter by betting against some popular ETFs with indirect links to bitcoin.

The two funds the company 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, seeking to achieve double daily returns Micro strategy, a software company that has become a bitcoin treasure trove in recent years.

The funds have at times struggled to achieve this goal due to MicroStrategy's volatility and the tight supply of derivatives, which are most easily used to generate leveraged returns.

The letter said Greenlight took short positions in these funds this quarter, partially offset by its ownership of MicroStrategy shares in an arbitrage transaction that emerged as a “significant winner.”