Surveys from the past two months revealed today suggested that investors aren’t sure that Bitcoin’s gains are viable.
There aren’t always rainbows and sunshine for Bitcoin.
Almost half of the money managers surveyed in a monthly Deutsche Bank survey rated Bitcoin with 10. But it was on a 1-10 scale of how big a financial bubble it was.
Most survey respondents stated that the digital asset, together with the stock prices for electric automaker Tesla, were more likely to halve in value than double in the coming year.
Money managers are firms that buy and sell securities for clients. Because they have a fiduciary duty to manage their clients’ money wisely, their perspective provides hints at where the markets can go in the coming year.
And they are assuming Bitcoin can be a bubble.
A bubble is when an asset’s price quickly grows even higher than its inherent value, buoyed by the public picking up on investment trends and by media reports. The perceived value goes very high, and it ultimately “pops,” and the price drops drastically.
Bitcoin now sits at a current price north of $36,000 – triple its price three months ago.
The Chief Investment Strategist at BofA Global, Michael Hartnett, said early this month that Bitcoin hit an all-time high above $40,000 – that BTC was the “mother of all bubbles.” After several days, the market corrected, scraping the $32,000 mark. And it has partially recovered ever since.
Concurrently, Tesla stocks now cost $844.55; they stood at $408 last November 16, 2020.
Also, BofA released today a monthly survey of its corporate clients, who were questioned from January 8 to 14. According to Bloomberg, respondents named Bitcoin as the most crowded trade for the first time in history, meaning that many people make the same bets on the Price of Bitcoin rising. Crowded trades are mostly associated with bubbles.
Not everyone is confident that the market is in bubble territory. In the crypto space, a venture capital firm, Pantera Capital, released an investor letter last week that tied BTC’s price to the May 2020 Bitcoin halving, which slashed rewards for Bitcoin miners. Pantera’s Dan Morehead and Joey Krug stated that if historical trends hold, “Bitcoin would peak at $115,212 /BTC in August 2021.”
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