Bank of America’s chief investment strategist sees bitcoin as “the mother of all bubbles”. He compared the cryptocurrency’s recent rally to other bubbles, highlighting bitcoin’s “increasingly speculative” investment behavior.
Bank of America warns of huge Bitcoin bubble
Bitcoin’s recent rally has troubled a number of prominent financial analysts, who warned of a huge bubble. Among them is Michael Hartnett, chief investment strategist at Bank of America Securities.
He explained on Friday that the recent rise in bitcoin’s price may be another case of a speculative mania, stressing that bitcoin looks like ‘the mother of all bubbles’. The strategist believes that “violent” inflationary price action in markets has helped bitcoin’s rally in the past two months. Hartnett noted that bitcoin has outperformed other assets over the past few decades, with a price increase of about 1,000% since early 2019.
Bitcoin “is blowing the doors of past bubbles,” he said, holding up its achievements with other past bubbles. They include a rise in the gold price of more than 400% in the late 1970s, Japanese stocks in the late 1980s, and the Thai stock market in the mid 1990s. He also compared bitcoin’s rally to dotcoms in the late 1990s and house prices in the mid-2000s. The strategist pointed out that those sectors saw triple-digit percentage gains before collapsing.
The Bank of America strategist did not say the price of bitcoin will fall like other bubbles in the past. However, he noted that the rise in cryptocurrency prices is another example of ‘increasingly speculative’ investment behavior.
Others who have recently warned of a bitcoin bubble include David Rosenberg, chief economist and strategist at Rosenberg Research. He started to warn of one bitcoin bubble back in December, describe BTC as “just a classic, follow-the-herd, extremely busy business.” Another warning comes from NYU economics professor Nouriel Roubini, aka Dr. Doom. “The price of bitcoin is completely manipulated by a bunch of people, by a bunch of whales,” he claimed in late December. “It has no fundamental value. We are close to the point where the hyperbolic bubble is breaking. “
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