Of late, especially since the beginning of this year, Bitcoin has taken the world by storm. The cryptocurrency has soared to highs that nobody could have perhaps predicted. Now, its market value is nearing $1 trillion or a little over Rs 72 lakh crore.
So far, in 2021, Bitcoin has added more than $415 billion of value, and is now at about $956 billion, shows data compiled by Bloomberg. This surge has resulted in the cryptocurrency yielding returns that far outstrip the performance of assets such as stocks and gold.
Speculators, investors and skeptics, however, have contrasting views on the cryptocurrency. While some see Bitcoin as an asset that’s being accepted for its ability to hedge risks such as inflation, others think it’s a precarious mania riding atop waves of monetary and fiscal stimulus.
Nouriel Roubini, economist at New York University’s Stern School of Business, told Bloomberg a couple of days ago that Bitcoin was “a bubble” and that it will never be used as a mode of payment for goods and services.
“Fundamentally, Bitcoin is not a currency. It’s not a unit of account, it’s not a scalable means of payment, and it’s not a stable store of value… the Flintstones had a better monetary system than Bitcoin,” Roubini told Bloomberg.
The Bitcoin spike has been termed “unsustainable” by JP Morgan analysts, who have said the price surge this year has been “more influenced by speculative flows”.
In a note published on February 16, the analysts said, “This also suggests that some pickup in real money flows would likely be needed to sustain current prices in the absence of a re-acceleration of the retail flow.”
JP Morgan suggested that retail interest, which has been “particularly strong since January”, has been “a driving force not only for equities, but also for bitcoin”.
Last week, Nassim Nicholas Taleb, author of ‘The Black Swan’, had announced on Twitter that he was “getting rid” of his Bitcoin, citing the unprecedented volatility in its prices. He further argued that one cannot price goods in Bitcoin and hence, the cryptocurrency was a “failure” in that respect.
I’ve been getting rid of my BTC. Why? A currency is never supposed to be more volatile than what you buy & sell with it.
You can’t price goods in BTC
In that respect, it’s a failure (at least for now). It was taken over by Covid denying sociopaths w/the sophistication of amoebas
— Nassim Nicholas Taleb (@nntaleb) February 12, 2021
Tesla CEO Elon Musk, the world’s richest man who has the uncanny power to move markets with his tweets, has said owning Bitcoin was only slightly better than holding conventional cash, and it is this little difference that makes it a better asset to hold.
In a tweet on February 18 (Thursday), he wrote, “To be clear, I am *not* an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla. However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere. Bitcoin is almost as bs as fiat money. The key word is ‘almost’ (sic).”
To be clear, I am *not* an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla.
However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.
Bitcoin is almost as bs as fiat money. The key word is “almost”.
— Elon Musk (@elonmusk) February 19, 2021
In another tweet, he said Bitcoin was a “less dumb form of liquidity than cash” while asserting that Tesla’s decision was not reflective of his opinions.
Tesla’s action is not directly reflective of my opinion. Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P500 company.
— Elon Musk (@elonmusk) February 19, 2021
Tesla’s $1.5 billion bitcoin purchase on February 8 set the cryptocurrency soaring towards last week’s record high of $50,000. Musk has off and on also vociferously tweeted in support of Dogecoin, another cryptocurrency, sending its price to new highs.
On February 19 (Friday), Bitcoin was steady just below the record peak of $51,284 or around Rs 37 lakh. Last week, Canada became the first country in the world to clear the launch of a bitcoin exchange-traded fund (ETF).
According to a Reuters report, Ontario Securities Commission approved the launch of Purpose Bitcoin ETF by Toronto-based asset management company Purpose Investments Inc.
Christopher Wood, global head of equity strategy at Jefferies, has also endorsed the crypto asset, stating that he remains extremely bullish on bitcoin and advising wannabe investors to jump into the fray and take advantage of any pullbacks.
In the latest edition of the Greed & Fear newsletter released on February 12, Wood wrote, “Remember that institutional ownership of bitcoin has only just begun. It should also be remembered that bitcoin rose by 85 times in the 12 months after the first November 2012 halving and by 30-fold in the 18 months after the July 2016 halving. It has so far risen by ‘only’ 418% since the most recent halving in May 2020. Meanwhile, it is surely only a matter of time before a bitcoin ETF is approved by the Securities and Exchange Commission (SEC) in America.”
As on 4 pm IST on Friday, Bitcoin’s value was at $52,864 or Rs 38 lakh. Following far behind were Ethereum at $1,932 (Rs 1.4 lakh), Binance Coin at $259 (Rs18,700) and Litecoin at $232 (Rs 16,800). Among other prominent cryptocurrencies, the worth of Polkadot was $32.44 (Rs 2,350), Tether was $1 (Rs 72) and XRP was $0.53 (Rs 38).