30.07.2021

Experts of the largest bank called Bitcoin “the father of all bubbles”. Why are they wrong?

Bitcoin’s rise in recent months has alarmed many Wall Street players. And while some of them are actively investing in cryptocurrency and making billions on its growth, others continue to criticize BTC.

A striking example of this was news from the two largest US banks – Morgan Stanley and Bank of America. The first acquired shares of the analytical giant MicroStrategy, which began to actively buy bitcoins at the end of summer 2020. At the same time, the second’s chief investment strategist, Michael Hartnett, called Bitcoin a “bubble”.

Recall that Bitcoin is often called a bubble – especially in 2017 against the backdrop of the massive growth of the first cryptocurrency. The reason for this attitude was, first of all, the serious growth of the asset. If on January 1 of that year it was estimated at $ 998, then already at the peak of the exchange rate on December 17, the indicator reached a record then $ 20 thousand.

We believe that the critics decided to call Bitcoin a bubble and other unflattering words because of the relative novelty of the asset. Since it has existed for more than twelve years, but came to the attention of most analysts just a few years ago, BTC is considered young. Accordingly, this scares off experts who have not figured out how the blockchain works and therefore are wary of Bitcoin.

It seems to us that such criticism is unfair, primarily because of the behavior of the shares. As we learned late last month, several companies surpassed Bitcoin in profitability last year. The best example here is Tesla, which jumped about eight times. Despite this, critics call BTC the bubble, which showed more modest profitability results over the same period.

And since stocks of companies give out great profitability, it is strange to call cryptocurrencies the biggest evil in the finance industry.

Why Bitcoin is criticized

According to Hartnett, the sharp rise in the price of Bitcoin above 40 thousand dollars caused the formation of “an unprecedented bubble in the cryptocurrency market.” In addition, Hartnett does not believe in the positive dynamics of asset prices, even in traditional markets, which is why he advises investors to “sell against the background of news about the spread of coronavirus vaccines.” Here is a quote from Decrypt.

Overpriced prices, greed in trader positions, inflationary and desperate political tactics, sharp relations with China and consumerism – all ultimately give a very “toxic start” in 2021.

That is, the expert believes that the current conditions in the financial markets do not actually contribute to a massive increase in the prices of various instruments. This is despite the fact that many of them – including cryptocurrencies – have already shown incredible growth in the past few weeks.

Judging by the actions of the Morgan Stanley management, it would fundamentally disagree with the words of Michael Hartnett. As it became known the day before, the investment bank acquired 792,627 shares of MicroStrategy, which currently accounts for 10.9 percent of all securities issued by it. The decision was very successful, because in the period from December 8 to January 8, MicroStrategy shares rose in price from $ 289 to $ 545, according to Cointelegraph.

Importantly, Morgan Stanley’s investment in MicroStrategy has grown 360 percent since the third quarter of 2020, or approximately 650,000 shares. Accordingly, the bank’s interest in the company that invests in crypto has increased.

As a reminder, MicroStrategy is one of the most active Bitcoin buyers in 2020. The company began investing in the first cryptocurrency in the summer, and started with the acquisition of 38,250 BTC for $ 425 million. Then the management increased the open position, bringing it to at least 70 thousand coins. At the same time, the company last purchased bitcoins at an average price of $ 21,925.

Taking into account the huge amounts of investments, these investments have already brought the company millions of dollars in profit. However, as previously reported by MicroStrategy CEO Michael Sailor, they do not plan to sell cryptocurrency and fix profits for at least a hundred years.

As you can see, even large investors are gradually moving to a “new reality”. Bitcoin is now not just a passing hobby of crypto enthusiasts, but a full-fledged investment position of entire companies. However, as analysts note, the cryptocurrency market is still far from its maximum given the current indicators.

We think that calling Bitcoin a bubble in 2021 is weird. Yet the cryptocurrency niche is now much stronger and more diverse than it was in 2017. In addition, many world famous companies have invested hundreds of millions of dollars in BTC, thereby confirming the legitimacy of this asset.

In addition, the contrast in the actions of different banks is quite amusing. While some continue to criticize the increasingly popular investment tool, others are investing in related companies and planning to make money on it. Judging by what is happening in the niche, the truth will ultimately be on the side of the latter.

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