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Bitcoin or Bubblecoin?

Bitcoin prices have doubled in less than a month to more than $40,000. And while cryptocurrency bulls argue this sensational surge is warranted, some on Wall Street are cautioning that this won't end well. The recent rally might be another case of speculative mania. bitcoin (XBT) looks like "the mother of all bubbles" according to Michael Hartnett, primary financial investment strategist at Bank of America Securities. Hartnett explains in a recent report that the remarkable rise in bitcoin during the past 2 years-- a rise of approximately 1,000% because the start of 2019-- is far greater than the gains for other properties that have actually delighted in huge runups in the past few years. That includes a rise in gold rates of more than 400% in the late 1970s, as well as other notable investing manias: Japanese stocks in the late 1980s, Thailand's stock exchange in the mid-1990s, dot-coms in the late 1990s and housing rates in the mid-2000s. Those sectors all delighted in triple-digit portion gains before crashing down to earth. More recently, Chinese stocks, biotechs and the FAANGs of Big Tech have also posted enormous gains. Hartnett didn't predict bitcoin rates will plunge per se. Instead, he mentioned the froth in cryptocurrency rates as yet another example of "significantly speculative" investing behavior. He likewise warned of the increased interest in IPOs and SPACs for huge unicorn startups. Hartnett's not the only one sounding bitcoin alarm bells. Given that the United States dollar has actually stabilized rather recently, some caution that one of the bulls' big cases for owning bitcoin-- as a hedge against currency declines-- no longer exists. "The bitcoin chasers here are not protecting themselves versus a dollar crisis, they are just paying two times as much for an 'possession' than they were at Thanksgiving," Mike O'Rourke, chief market strategist with JonesTrading, said in a report Thursday. Still, the bitcoin faithful stay persuaded that rates can keep climbing up, citing the mainstream adoption of the cryptocurrency by the similarity PayPal (PYPL) and Square (SQ) as well as increased interest from major financiers including Paul Tudor Jones and Stanley Druckenmiller. Financiers brushed off the BofA warning Friday. Bitcoin prices increased another 5% to go beyond $41,000. They have surged 25% in just the past five days.

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