Bitcoin rally may be the ‘mother of all bubbles

Bitcoin

Bitcoin prices have doubled in less than a month to more than $40,000. And while cryptocurrency bulls argue this stunning surge is justified, some on Wall Street are warning that this won’t end well.

The recent rally may be another case of speculative mania. bitcoin (XBT) looks like “the mother of all bubbles” according to Michael Hartnett, chief investment strategist at Bank of America Securities.

Hartnett points out in a recent report that the dramatic rise in bitcoin during the past two years — a surge of roughly 1,000% since the beginning of 2019 — is far greater than the gains for other assets that have enjoyed massive runups in the past few decades.

That includes a surge in gold prices of more than 400% in the late 1970s, as well as other notable investing manias: Japanese stocks in the late 1980s, Thailand’s stock market in the mid-1990s, dot-coms in the late 1990s and housing prices in the mid-2000s. Those sectors all enjoyed triple-digit percentage gains before crashing down to earth.

More recently, Chinese stocks, biotechs and the FAANGs of Big Tech have also posted gigantic gains.

Hartnett didn’t predict bitcoin prices will plunge per se. Instead, he cited the froth in cryptocurrency prices as yet another example of “increasingly speculative” investing behavior. He also warned of the increased interest in IPOs and SPACs for big unicorn startups

Source:https://edition.cnn.com/2021/01/08/investing/bitcoin-bubble/index.html

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