The Bitcoin Bubble

There are 2 schools of thought regarding Bitcoin:

1) It is a speculative bubble and will eventually collapse

2) It is an alternative currency and a way to preserve value

Now that it is down ~50% from the highs last month, which camp are you in?

My own view is that bitcoin is a speculative bubble like the Dutch tulipmania of 1634: 1) bitcoin has no intrinsic value and trades on sentiment alone, 2) its volatility makes unsuitable as a currency replacement, and 3) is currently not accepted at major asset custodians.

Last week, one analyst mentioned that the total value of crypto-currency ($1.5-2.0 trillion) was comparable to the size of Japan's currency market. So if a currency of this magnitude pops, then drops, are there any systemic ramifications? There is a lot of money tied up in crypto WITHOUT the benefit of a central bank backstop. This may be precisely why we have the exhilarating highs and gut-wrenching falls in the crypto asset world.

Robert Lloyds, CFA®

Chief Investment Officer

Lloyds Intrepid Wealth Management

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