Three-quarters of fund managers think bitcoin is in a bubble, according to Bank of America’s latest fund manager survey. Is it?
The bubble case is easily made. Bitcoin has more than doubled in 2021 and is up ninefold over the last year. Signs of speculative fervour in the cryptocurrency space are not hard to find. On the same day bitcoin topped $64,000 (€53,000), cryptocurrency exchange platform Coinbase made its market debut after securing an eye-popping valuation of almost $100 billion (€83 billion).
Dogecoin – the meme cryptocurrency invented as a joke – more than doubled in 24 hours and is up almost 3,000 per cent in 2021.
Nevertheless, things can get a lot “gaudier” when it comes to bitcoin, says Bespoke Investment. It notes bitcoin was up 2,400 per cent in the year prior to its December 2017 high about $19,000 (€16,000). It “went into orbit” in the two months prior to that peak, gaining over 240 per cent. By comparison, bitcoin is up “only” around 30 per cent over the last two months.
Similarly, Google searches for bitcoin today are well below 2017’s highs, says Bespoke, further suggesting sentiment is much less frenzied than it has been in the past.
Bitcoin may well be in a bubble, but that doesn’t mean it can’t get bubblier.