Robert Lloyd, CFA
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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