Published: June 18th, 2021
Four out of five fund managers think Bitcoin is in a bubble. That’s the key finding of a recent survey conducted by the Bank of America.
The BoA survey found that long commodities now represent the ‘most crowded’ trade, with long Bitcoin pulling a close second. Commodities refer to raw materials used in manufacturing like wood, oil, nickel, iron, or precious metals like gold.
Precious metals, in particular, are often sought after by investors as a useful hedge against inflation. Fears about currency debasement and central bank action to stave off inflation are high at the moment.
The bank surveyed 220 fund managers cumulatively responsible for more than USD 650 billion in managed assets. Despite the show of scepticism by such an influential group, not everyone is convinced that BTC’s steady rise this year is driven solely by speculation.
Analysts at Quantum Economics told Bloomberg that the survey shows ‘a complete misunderstanding about the problems Bitcoin is meant to solve.’ Too many people see BTC as just another asset to trade, they say, with the crypto’s fundamentals supporting the idea that Bitcoin is ‘ready for even bigger price appreciation.’
The Bank of America findings have arrived after a rollercoaster half-year for Bitcoin’s price.
Currently sitting at +/- USD 40,000 at time writing, BTC has grown by 20 per cent over the last week alone. It also posted a 13 per cent decline in the previous month. At its lowest ebb in the previous 30 days, BTC’s price dropped as low as USD 31,000.
So it's a tale of dizzying ups and downs, but if you can get past the apparent issue of volatility, regulators are taking it more seriously too.
The IRS Cyber Crimes Unit told The Washington Post this week that the agency is monitoring conversations on crypto’s favourite chat platform, Telegram, to find evidence of organised criminals using Bitcoin to move or launder illicit funds.
It’s not all been bad news for BTC, however. After first promoting Bitcoin and then walking back his enthusiasm, Tesla CEO Elon Musk said the company would revisit its decision not to accept BTC for payment — if crypto miners shift to 50 per cent renewable energy targets.
It’s just the latest in a long list of Musk-ite tweets about the current state of crypto markets. When Tesla abruptly ceased accepting Bitcoin last month, Musk's tweets were widely blamed for triggering its price collapse.
While fund managers and finance watchdogs may be less than bullish on Bitcoin’s future prospects, consumers don’t seem to have got the message.
According to an annual poll taken by Britain’s Financial Conduct Authority (FCA), UK cryptocurrency users are growing in number. They also seem to be increasingly confident about crypto as an asset class.
The survey found that 77 per cent of the UK adult population has heard of cryptocurrency, which is a notable jump from 42 per cent in 2019. It’s also up five per cent from 2020 levels.
The number of British people who own crypto is also growing, though slowly; 5.6 per cent of respondents versus 5.3 per cent last year. Still, researchers estimate that as many as 2.4 million Britons currently hold crypto, up from circa 1.8 million last year.
The typical UK crypto user remains mostly male (77 per cent), with 70 per cent aged over 36.
An interesting trend is the shifting reasons why Brits buy crypto in the first place. More than a third of those surveyed still see cryptocurrencies as a gamble that can deliver gains or losses. The number of people expressing that belief is down, however, by 9 per cent from 2020.
Alongside shrinking perceptions of cryptocurrencies as a techy punt, 30 per cent of respondents said they bought digital assets as part of a broader investment strategy to diversify their portfolios.
More users, from 22 to 28 per cent, also agreed that cryptocurrencies have more gains potential than traditional investment vehicles offered by mainstream finance.
On crypto investment preferences, two-thirds said they favoured, followed by Ethereum at 34 per cent, Litecoin at 20 per cent, XRP at 17 per cent, and Bitcoin Cash at 16 per cent.
While crypto enthusiasts will take heart from the research, the FCA’s summary of the findings does strike at least one bearish note.
They point to a diminished level of understanding about what cryptocurrencies are and what they can do. At least 30 per cent of respondents who had heard of crypto could not pick out the correct definition from a list of statements.
Bitcoin’s price leapt back from its June doldrums to rise by more than 14 per cent at the start of the week, quickly passing the USD 40,000 resistance point after three weeks treading water in the mid-to-high USD 30,000’s range. The drop to 30k followed a surge in BTC’s price in the early part of 2021 that saw it almost touch 60,000 at one point in March.
BTC is now back on the front foot, peaking at USD 41,116 bat time of writing. That established a high for June after a turbulent weekend that saw several wild price swings.
Despite the cautious tone struck by the BoA research, Bitcoin is back riding a wave of positive sentiment. Part of it is driven by newly supportive tweets from Elon Musk, plus recent moves by El Salvador and the Republic of Tanzania to declare Bitcoin legal tender in those countries. Several other nations, including Nicaragua, have signalled an intention to follow their lead.