Bank of America’s chief investment strategist predicts a Bitcoin bubble
Michael Hartnett, the chief investment strategist at Bank of America Securities, believes the recent cryptocurrency rally is a bubble, comparing it to the other huge economic bubbles in history. He explained on Friday that the ongoing surge in Bitcoin’s (BTC) price could be another case of a speculative mania.
According to Hartnett, Bitcoin will be the ‘mother of all bubbles’ due to its current condition. He believes that the massive inflationary price action in markets helped the cryptocurrency’s rally in the past two months. He added that BTC’s price surge since the beginning of 2019 is over 1,000%, surpassing the gains recorded by other financial assets in the past few decades.
This BTC bubble could surpass the Gold price surge by more than 400% in the ’70s, Japanese stocks in the ’80s and the Thailand stocks in the late ’90s. Hartnett also compared Bitcoin’s rally to the housing prices in the mid-2000s and the dot-com bubble of the late ’90s. He pointed out that these rallies all experienced triple-digit percentage gains before crashing down. At its height, Bitcoin is experiencing a four-digit percentage gain, surpassing the performances of the other financial assets.
The Bank of America strategist didn’t say that Bitcoin’s price will plunge like the previous bubbles. However, he describes the surge in cryptocurrency prices as an example of increasingly speculative investing behaviour.
Despite its recent rally and strong fundamentals, the cryptocurrency’s rally still attracts some sceptics. Last month, David Rosenberg, chief economist and strategist at Rosenberg Research, warned about a Bitcoin bubble as he believes the cryptocurrency has no underlying basis for its current performance. Rosenberg accused investors of not understanding how Bitcoin’s supply works.
The economist said, “Everybody seems to believe that we’re going to get to that 21 million caps on the supply constraint, but there’s nothing in the protocol to suggest that the supply of Bitcoin can’t go up once we hit that limit”.
Bitcoin enjoyed a stellar 2020 after rallying by nearly 400% during a pandemic year. It continued its rally in 2021, reaching the $40,000 mark last week. However, the leading cryptocurrency’s price has cooled off over the past few days and is trading above $36,000 at the time of this report.