Michael Hartnett, Chief Investment Strategist at BofA, recently suggested this latest Bitcoin rally could be leading into “the mother of all bubbles”.
Over the Christmas season Bitcoin more than doubled in value. It saw new all-time-highs after attracting a swath of institutional investment. This rise prompted a number of traditional investors and analysts to caution that Bitcoin may be entering a hyper-speculative stage.
Michael Hartnett, Chief Investment Strategist at BofA, recently suggested this latest Bitcoin rally could be leading into “the mother of all bubbles”. In a recent report, Hartnett points to the accelerated rise in gold prices in the 70s. In that case, the store of value rose over 400% in just a few years. He goes onto explain that crypto’s performance this year far outdoes that surge and could be an indication of it entering a ‘bubble-like’ phase.
This is not the first time Bitcoin has been likened to a bubble. In May last year, Bitcoin was recovering from a dip to the $3000s in March. Paul Eisma, head of trading at XBTO Group, suggested to Forbes that Bitcoin was “in a market state similar to the post-dotcom boom”. More recently, former White House Director of Communications, Anthony Scaramucci, told CNN in an interview that he thought Bitcoin was due for a correction as the traditional stock market performs better than expected.
Scaramucci’s remarks are worth noting. Many in the cryptocurrency community have been of the opinion that Bitcoin is a hedge against traditional investments. Despite the impact of the COVID-19 pandemic on the global economy, stocks have been performing relatively well for investors. Equities staged an impressive rally as plans for mass-vaccinations were announced worldwide.
Furthermore, interest in bitcoin from large institutions soared in 2020. According to analytics firm CryptoQuant, the cryptocurrency exchange Coinbase saw its over-the-counter trading desk volumes surge in large part due to its institutional clients.
Scaramucci himself is investing in the top-cryptocurrency, launching the SkyBridge Bitcoin Fund last week. He states in that CNN interview, that Bitcoin’s best days are ahead of it, despite warning of a correction.
Happy New Year, BofA
As a new year begins and there is light at the end of the pandemic tunnel, the comments from BofA urge caution. But when it comes to Bitcoin, a growing number of its peers seem to be cautiously optimistic.