I’m more than a bit worried about Bitcoin. While the digital currency’s recent price spike has attracted plenty of cheer — just yesterday it surged to levels not seen since January 2018, above $13,000 — I’m worried plenty of new entrants into the market are setting themselves up for a fall.
What goes up…
In total, Bitcoin has gained around 65% in value over the past month alone, giving all the signs of an overheated market. There are plenty of critical questions over the legitimacy of Bitcoin (and the broader cryptocurrency arena) which remain unanswered, adverse answers which could send prices of these new-age assets plunging through the floor.
Last week’s decision by the Financial Conduct Authority to ban crypto-linked products in Britain certainly suggests regulators remain less-than-enthused over the way virtual currencies are valued and handled. Since then, the European Central Bank has chimed in to highlight the problems of the asset class. When asked about whether the bank was thinking of adding them to its reserves, economist Philip R Lane commenting simply that “Bitcoin is not a currency, it rather is an asset and it is very volatile.”
Could the Securities and Exchange Commission be the next to give Bitcoin et al the thumbs down by throwing out plans for the launch of an exchange-traded fund?