bitcoin bubble

Bitcoin Near ‘Extreme Bubble’ but Tesla More Vulnerable: Deutsche Bank Survey

22/01/2021 by Idelto Editor

Deutsche Bank has conducted a survey about financial bubbles. Eighty-nine percent of respondents see some bubbles in financial markets, with bitcoin near the “extreme bubble” territory. However, more respondents expect the cryptocurrency to double than they do Tesla’s stock.

Deutsche Bank’s Bubble Survey

A survey published Tuesday by Deutsche Bank asked 627 market professionals to rate on a scale of zero to 10 how they see financial bubbles in a range of assets. According to CNBC, the survey was conducted between Jan. 13 and Jan. 15. The bank found that 89% of survey respondents currently see some bubbles in financial markets.

Bitcoin is the closest to the “extreme bubble” territory, followed by U.S. tech equities, and European government bonds, according to the respondents. In addition, they see less of a bubble in European equities, Asian equities, and non-tech U.S. equities.

The price of bitcoin has risen about 66% since the beginning of December and about 9% since the beginning of the year. Bitcoin’s price reached an all-time high above $41K on Jan. 8. It has since retreated and stands at $32,475 at the time of writing, based on data by markets.Bitcoin.com.

The Deutsche Bank survey also compares bitcoin to Tesla’s stock, which has also seen huge gains over the recent months. Tesla’s stock is up 44.5% since the beginning of December and almost 16% since the beginning of January. Deutsche Bank strategist Jim Reid, along with research analysts Karthik Nagalingam and Henry Allen, explained:

When asked specifically about the 12-month fate of bitcoin and Tesla — a stock emblematic of a potential tech bubble — a majority of readers think that they are more likely to halve than double from these levels with Tesla more vulnerable according to readers.

When comparing Tesla’s stock to bitcoin, however, more respondents believe that bitcoin is more likely to double than Tesla and less likely to halve.

The Deutsche Bank survey also asked respondents about the Federal Reserve tapering its asset purchasing program as a potential factor that will pop the bubble. “71% of respondents do not believe that the Fed will taper before year-end, which is in line with what Fed governors had been saying forcefully by the end of last week,” the Deutsche Bank analysts conveyed. They noted that “a quarter of readers may think that economic growth/markets could force their hand.”

What do you think about Deutsche Bank’s findings? Let us know in the comments section below.

Bitcoin Now the Most Crowded Trade – Labeled a ‘Bubble’ in Bank of America Survey

20/01/2021 by Idelto Editor

According to findings of a recent Bank of America (BOA) survey, buying bitcoin has now surpassed tech stocks as the most crowded trade. This new ranking means tech stocks have been relegated into second place for the first time since October 2019.

Bitcoin Bubble Ranking

Still, a majority of the interviewed fund managers believe bitcoin “to be in a bubble.” Consequently, as the Reuters report notes, a majority of these respondents predict that the value of bitcoin will halve within 12 months.

Since the start of 2021, the value of bitcoin has surged 30% from just under $29,300 to reach the all-time high (ATH) of over $41,900 on January 8. This 30% growth in value after just 8 days follows the crypto’s price rising by over 300% in 2020. However, at the time of writing, bitcoin is trading at just $34,400.

Meanwhile, another survey by Deutsche Bank finds that many investors currently see bitcoin as the number one bubble. For instance, when asked to rank bitcoin on the 1-10 bubble scale, nearly half of respondents gave the crypto-asset a 10. Tesla is the next asset to be labeled a bubble by respondents after the tech giant’s stock “soared nearly 750%.” Tesla “is seen as emblematic of highly-priced tech stocks.”

However, in sentiments similar to those expressed by respondents to the BOA survey, a majority of respondents to the Deutsche Bank study predicted that in the next twelve months, bitcoin and the Tesla stock ie “more likely to halve than double in value.”

Investor Risk Aversion

In the meantime, in other findings, the BOA study says “a record 19% of investors were currently taking on more risk than normal in their investment portfolios.” The survey also found that a “proportion of fund managers surveyed by BOA who said the global economy was in an early-cycle phase, as opposed to a recession, at its highest in 11 years.”

Furthermore, a record 92% expected higher global inflation over the next year, though Deutsche Bank’s survey also showed 71% expected the U.S. Federal Reserve to resist the temptation to start removing the stimulus that has helped markets rally.

Do you agree that bitcoin is the number one bubble ahead of tech stocks? Tell us what you think in the comments section below.

Mark Cuban: Crypto ‘Exactly’ Like Dot-Com Bubble — Expects Bitcoin to Survive Bubble Burst, Thrive Like Amazon

13/01/2021 by Idelto Editor

Mark Cuban: Crypto 'Exactly' Like Dot-Com Bubble, Expects Bitcoin to Survive Bubble Burst and Thrive Like Amazon

Billionaire Shark Tank investor Mark Cuban sees cryptocurrency “exactly” like the dot-com bubble. He says bitcoin and a few other cryptocurrencies are analogous to those dot-com stocks, like Amazon and Ebay, that survived the bubble burst and thrived.

Mark Cuban Likens Crypto to Dot-Com Bubble

Shark Tank star Mark Cuban compared what he feels is a bubble in bitcoin to the dot-com bubble on Monday after the price of the cryptocurrency took a nosedive. The owner of the National Basketball Association’s (NBA) Dallas Mavericks tweeted:

Watching the cryptos trade, it’s exactly like the internet stock bubble. Exactly. I think BTC, ETH, a few others will be analogous to those that were built during the dot-com era, survived the bubble bursting and thrived, like AMZN, Ebay, and Priceline. Many won’t.

“Along the way, many fortunes will be made and lost and we find out who has the stomach to hodl and who doesn’t. My advice? Learn how to hedge,” he elaborated.

At the time of writing, his tweet has garnered 895 comments. It has also been retweeted over 1.7K times and liked more than 10.8K times. Several people on Twitter view Cuban’s comment as bullish for BTC and ETH.

Among the commenters was Tyler Winklevoss, co-founder of Gemini cryptocurrency exchange, who argued that cryptocurrencies are not like stocks. “Wrong. Cryptos like BTC and ETH are networks, they are definitely not stocks or shares of a company. They are like owning a piece of the early Internet. Comparing them to stocks is an apples to oranges comparison,” he explained to Cuban. After discussing bitcoin as a store of value, the Shark Tank star reiterated his stance:

I said BTC is like gold, it’s a store of value with no other utility. At least I can eat bananas.

Gold bug Peter Schiff chimed in, telling Cuban: “Mark, you can’t store what you don’t have. Gold is a store of value as you are storing gold for future use as a metal. Jewelers will need gold, computer chip manufactures will need gold, dentists, etc. But no one actually needs bitcoin now, so no one will need it in the future.”

In a follow-up tweet, Cuban wrote:

As during the dot-com bubble, ‘the experts’ try to justify whatever the pricing of the day is. Crypto, much like gold, is a supply and demand driven. All the narratives about debasement, fiat, etc are just sales pitches. The biggest sales pitch is scarcity vs demand. That’s it.

The Gemini co-founder disagreed. “The narratives around debasement of fiat are facts. Have you looked at the Fed’s balance sheet lately? What’s the matter with supply and demand? The value of land, a Picasso, or the Dallas Mavericks franchise are determined by supply and demand too,” he told Cuban.

Do you agree with Mark Cuban about bitcoin? Let us know in the comments section below.

Bank of America Predicts ‘Mother of All Bubbles’ for Bitcoin

10/01/2021 by Idelto Editor

Bank of America’s chief investment strategist sees “the mother of all bubbles” in bitcoin. He compared the cryptocurrency’s recent rally to other bubbles, emphasizing the “increasingly speculative” investing behavior of bitcoin.

Bank of America Warns of Huge Bitcoin Bubble

Bitcoin’s recent rally has worried a number of prominent financial analysts who warned of a huge bubble. Among them is Michael Hartnett, chief investment strategist at Bank of America Securities.

He explained on Friday that the recent surge in bitcoin’s price may be another case of a speculative mania, emphasizing that bitcoin looks like “the mother of all bubbles.” The strategist believes that “violent” inflationary price action in markets helped bitcoin’s rally in the last two months. Hartnett noted that bitcoin has outperformed other assets in the past few decades with its price surging about 1,000% since the beginning of 2019.

Bitcoin “blows the doors off prior bubbles,” he said, holding its performance up to other past bubbles. They include a surge in gold prices of more than 400% in the late 1970s, Japanese stocks in the late 1980s, and Thailand’s stock market in the mid-1990s. He also compared bitcoin’s rally to dot-coms in the late 1990s and housing prices in the mid-2000s. The strategist pointed out that those sectors saw triple-digit percentage gains before crashing down.

The Bank of America strategist did not say that the price of bitcoin will plunge like other bubbles in the past. However, he noted that the surge in prices of cryptocurrencies is another example of “increasingly speculative” investing behavior.

Others who have recently warned about a bitcoin bubble include David Rosenberg, chief economist and strategist at Rosenberg Research. He started warning about a bitcoin bubble back in December, describing BTC as “just a classic, follow-the-herd, extremely crowded trade.” Another warning comes from NYU professor of economics, Nouriel Roubini, aka Dr. Doom. “The price of bitcoin is totally manipulated by a bunch of people, by a bunch of whales,” he claimed at the end of December. “It doesn’t have any fundamental value. We’re close to the point where the hyperbolic bubble is going to go bust.”

Do you agree with Bank of America about bitcoin’s bubble? Let us know in the comments section below.

How Investors Are Presented With Bitcoin: ‘A New Decentralized Monetary Asset, Akin to Gold’

15/05/2020 by Idelto Editor

Bitcoin (BTC) is a compelling investment case “for patient, long-term investors” willing to spend the time to understand the top cryptocurrency, a new paper by Paradigm co-founder managing partner Matt Huang notes.

The crypto entrepreneur places BTC besides gold, as a go-to store of value, amid unprecedented stimulus spending by governments during the Covid-19 crisis.

“Bitcoin is likely to earn a place alongside gold as a sensible part of many investment portfolios,” Huang says in a paper aimed at reaching out to conventional investors, “Bitcoin for the open-minded skeptic.”

“It combines the scarce, money-like nature of gold with the digital transferability of modern currency,” he added. At the peak of the virtual currency’s adoption curve, “central banks may come to view bitcoin as a complement to their existing gold holdings.”

Huang’s paper is not so much premised on novel insights as it is about mapping a future out of BTC’s intrinsic features.

Beyond comparing favorably to some cryptocurrencies for its classic money features such as scarcity (at 21 million coins), portability, and broad accessibility, bitcoin intrinsically improves on traditional assets. Its digital format, programmability, universality, and decentralization are a source of alternative appeal.

Decentralization and immunity to censorship afford BTC holders “a special kind of confidence: that bitcoin cannot be devalued by arbitrary monetary policy decisions, and that they will always be able to hold and transfer their bitcoin freely,” Huang writes.

This becomes especially important at a time when the markets are unusually exposed to politics, not just benign government interventions but also crisis-related protectionism and bilateral hostilities.

A recurring objection to BTC as an asset class is that it is a bubble but Huang turns the same criticism around in favor of the crypto. Citing Nobel laureate Robert Shiller, he notes that BTC is in good company as gold is also a bubble, being an asset class of no immediate utility but rather valuable for popular conviction about a future value that occasionally pushes the prices up.

Bitcoin bubbles of note, 2011, 2013, 2013-15, and 2017 began with high-conviction investors buying when things were quiet on the front, followed by media attention, speculation, further attention, and investor interest.

“Although painful for those involved, each bubble leads to broader awareness and motivates bitcoin’s underlying adoption, gradually expanding the base of long-term holders who believe in bitcoin’s potential as a future store of value,” Huang explains.

“Through successive bubbles, bitcoin reaches greater levels of scale in users, transaction volumes, network security, and other fundamental metrics,” he argues.

Bitcoin’s relative ease of access through in-built financial inclusion mechanisms will be useful in growing its market size as people with eroding currencies are more likely to get the digital asset than they are to get gold or other valuables like art or property.

Political considerations may also work in the cryptocurrency’s favor. “If foreign governments (some of whom already bristle at their dependence on US dollar forex reserves) begin to adopt bitcoin as a complement to existing gold holdings, the market size for bitcoin could expand significantly,” Huang adds without committing to a precise estimate.

Huang contrasts the general optimism of his paper with BTC risks such as volatility and regulation. Volatility, however, aids adoption and may terminate when broad acceptance lead to stability, while regulation can be mitigated by bitcoin’s decentralized nature.

What do you think about Bitcoin’s comparisons to gold? Let us know what you think in the comments section below.

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