Daily Management Review

Allianz Global Analyst Says Bitcoin Is An Asset Class Bubble Waiting To Burst


03/14/2018




Allianz Global Analyst Says Bitcoin Is An Asset Class Bubble Waiting To Burst
Experts at Allianz Global Investors are of the opinion that it is just a matter of when the Bitcoin bubble will burst and it is no more a question of if it will burst as many have been trying to project.
 
The investment wing of the biggest insurer of Europe said that even as significant benefits can be made available to investors by blockchain technology, there is no future or worth for bitcoin.
 
“In our view, its intrinsic value must be zero,” Stefan Hofrichter, the company’s head of global economics and strategy, wrote in a recent web post. “A bitcoin is a claim on nobody – in contrast to, for instance, sovereign bonds, equities or paper money – and it does not generate any income stream.”
 
He said that it has been more than two-and-a-half thousand years that gold has been the metal which people have used as a source of investment and is widely accepted to carry value at all times and therefore even though some may project similar arguments for the yellow metal they do not hold good. In comparison to gold, bitcoin has been around for just less than a decade.
 
“All of the boxes” are ticked in the affirmative by bitcoin with respect to all of the necessary criteria to constitute an asset bubble, he wrote. Those indications as identified by him, include rising leverage, over trading and “new-era” thinking. The mania for bitcoin is very similar to what the text books describe a bubble as and it is “one that is probably just about to burst.”
 
There have been many others who have expressed serious doubts about the underlying value of the digital currency and Hofrichter has added to that chorus voice. Digital currency is “an asset which has no value by traditional measures”, said University of Pittsburgh researchers while it was termed as the “biggest bubble in human people of worth history” by economist Nouriel Roubini.
 
At 2:45 p.m. Tokyo time, bitcoin traded at $9,126 which is 0.7 percent higher. The cryptocurrency dropped 2 per cent following an announcement by Google that it would not allow any advertisements that seek t promote cryptocurrencies and initial coin offerings. The policy of Google would be applicable starting June 2018. The value of bitcoin was over $19,000 in December and the current value is less than half of that peak
 
But according to Hofrichter, none of the traditional asset classes such as stocks and bonds would be impacted in case the bitcoin bubble bursts.
 
“Bitcoin’s demise would have few spillover effects on the ‘real world,’ since the market for this cryptocurrency is still quite small in size,” he said. “As a result, we believe that the risks to financial stability stemming from bitcoin are negligible -- at least as of today.”
 
(Source:www.bloombrg.com)






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