“Beware the Bitcoin bubble,” says Bank of America14. January 2021
About US$ 10 billion was invested in stocks last week, according to the BofA, while US$ 1.5 billion went to gold.
Bitcoin “is the door to previous bubbles,” according to Bank of America analysts, who say the digital currency is “bubbling,” citing the “violent” price action that has driven digital currency in the past two months.
The bank said that cryptomime has soared in the past 12 months and reached levels similar to other bubbles, such as that of China in the late 1990s and that of gold in the 1970s.
“Foaming prices, greedy positions, inflationary formulators and desperate […],” said BofA chief investment strategist Michael Hartnett.
Bank of America is one of the world’s largest financial institutions, serving approximately 56 million clients in the United States. The bank is among the world’s leading wealth management companies.
The bank recommended the sale of several stocks due to “sparkling prices” after its data showed that investors were invading the money markets and gold funds, while the stock market exuberance decreased slightly.
The BofA said the trend to “buy everything” in 2020 reached 2021, but expects a slowdown in risky assets (bitcoin) as “politics, positioning and profits” peak around March.
About $10 billion was invested in stocks last week, according to the BofA, while $1.5 billion went into gold.
It is not clear yet how much investment entered Bitcoin, with GrayScale alone attracting about half a billion per week at the end of December.
Investors have been investing in gold and Bitcoin as the dollar weakens with the mass printing of money.
In addition, the digital currency is being adopted as a portfolio diversification after numerous studies have concluded that the asset increases risk-adjusted returns.
This, however, may look like a bubble because it is the first time we are witnessing the launch and integration of an asset that was not subject to the laws of wealthy investors.
Startups like then Facebook or Google are closed to the public in the early stages by the Securities Act of 1933.
At this stage of rapid growth and rapid appreciation, the company is not publicly traded and therefore does not have a price that we can all invest.
However, it does have a private price that is accessible only to the rich and banks. If this price were accounted for as well, all these companies would look like a huge massive bubble.
So it’s not that Bitcoin is a bubble. It is more that, for the first time, we are witnessing the true open public pricing of an asset since its inception.
An asset that is growing in adoption and therefore is growing rapidly in price because bankers did not first buy all the shares or currencies to sell them to the public for the high price in an Initial Public Offering (IPO) as they did with Facebook, Google and all the other companies.
Showing a disconnect between the rich first and then the rest, for everyone first based on merit.
This difference explains why the term “bubble” is vomited every time Bitcoin goes up.
If the bankers had bought it before everyone else then it would have been a bubble.
Bitcoin, however, was launched publicly at a zero price and at a zero market capitalization, unlike any asset before it, perhaps in history.
So, if Bitcoin is a bubble, the rapid increase in valuation of any growing startup is a bubble too, something that would make everything a bubble, and therefore none.