Aberdeen Asset Management’s Peter Denious has been quoted and analyzed by a writer for bloomberg – Lionel Laurent as the early one said that speculations are what is feeding the uncontrolled excitement of the crowd investors. Lionel believes that bitcoin and other surging crypto could be a bubble that will eventually burst, as he claims that to many people are investing in digital assets as a way to escape worries about the condition of publicly regulated markets.
- This phenomena also called “gold rush” mentality as described by Peter, a lot of money will be lost before a lot is made.
While ether has had a growth of approx 4000%, and bitcoin tripled its value – Laurent believes the reason behind this is that it seems as the only way of making money as it is not being used to buy things or because of Governments regulations.
Crypto gets impacted by the regulated market
Laurent said the “crypto craze” is hard to separate from concerns in regulated public markets following 10 years of “cheap central bank cash.” Bubbles permeate all aspects of current financial markets.
Bank of America cited the following Friday, Laurent observed:
- Argentina has an oversubscribed 100-year bond.
- Facebook’s market cap surpasses the MSCI India index.
- The U.S. Treasury market’s volatility has reached an all-time low.
Bitcoin being not mentioned by the Bank of America, or the fact that is being mined even by John McAfee CEO of MGT Capital Investments, and Fidelity Investments CEO Abigail Johnson does not make it easy for bitcoin to be put in the right perspective.
Cryptocurrency markets reflect a desire to escape bubbles in public markets as opposed to simply emulating them, according to Laurent.
Cryptos also capitalize on the perception that they are markets in opposition to government and central bank policy.
Digital assets as an escape
Some see cryptocurrencies are seen as an escape from instability and financial repression even that While low yields drive wealthy investors to bigger risks such as Argentine debt.
In Venezuela, the demand for cryptocurrency has soared in the face of currency devaluation, political instability and ripple digit inflation, giving it among the greatest potential for bitcoin adoption, according to the London School of Economics.
Should a bubble burst, investors will need to lower their expectations about what cryptocurrency can achieve without rampant speculation.
political instability about wealth inequality and central bankers will drive more people to cryptocurrencies. Albert Edwards of Societe Generale has observed that people are close to turning against unaccountable and unelected central bankers following years of economic stagnation and crisis.
Should the path out of the financial crisis get worse, it may be too late to stop the rush into cryptocurrencies. Bubbles in both the crypto and publicly regulated markets appear to be too closely connected for investors to be comfortable.