Economist bearish on BTC: Bitcoin is in ‚bubble phase‘, expects correction
- Bitcoin has risen over 100% in the last six weeks despite the ongoing correction.
- Many think BTC will continue to rise in the coming weeks.
- Still, one market economist is bearish on Bitcoin.
He says the cryptocurrency is probably extremely overvalued at current valuations – and argues that it could be the biggest bubble in the markets right now.
Bitcoin in the „bubble phase“?
Even after a correction from $34,000 to $32,500, Bitcoin has risen over 100% in the last six weeks. The cryptocurrency traded at new all-time highs on Friday as institutional capital continues to flow into BTC.
Many in the space believe this Crypto Code rally is based on strong fundamental trends such as the depreciation of the US dollar. It is also well known that both retail and institutional investors are buying large amounts of Bitcoins.
Still, not everyone is convinced that the market will continue to soar.
David Rosenberg, chief economist at Rosenberg Research, believes that global markets are overextended. On the stock market, Bitcoin he left out for now, the investor explained:
„Based on our [equity market] valuation work, we’re somewhere between 20% and 30% overvalued based on a whole bunch of different metrics.“
He reiterated this bearish assessment for Bitcoin, arguing that it could be the biggest exaggeration/bubble in the markets today.
„The parabolic move in Bitcoin in such a short period of time, I would say, for any security, is highly abnormal.“
Despite his scepticism about Bitcoin, he said he remains a gold bull. He comments that the precious metal has about 20% of the volatility of bitcoin, so it might be a better safe haven.
While there are a number of other economists who believe Bitcoin is overbought, the overall trajectory of BTC remains bullish according to prominent Wall Street investors. Although not entirely representative of current price action, Grayscale’s Bitcoin Trust was up over 12,000 BTC on 22 December.
There is also news to suggest that prominent Wall Street funds continue to pull capital into Bitcoin. At the end of December, MicroStrategy confirmed that it had purchased around $650 million worth of BTC on the open market.
This purchase has now increased by around $300 million and adds to its existing holdings in the leading cryptocurrency.
The move was not entirely unexpected. Travis Kling, the founder of Ikigai, commented on Bitcoin’s price action on 26 December as follows:
„It is quickly becoming clear that the pain trade in #Bitcoin is much higher. It is obvious that institutions are coming up with big cheques. Much of this capital has yet to go through docs‘ and ‚investment committee‘. They thought they would buy at $20k. They’ll be lucky if they buy at $30k.“
It’s rapidly becoming clear that the pain trade in #Bitcoin is much higher.
It’s apparent that institutions are coming in w/ big checks. Much of that capital still has to „get through docs“ and „investment committee“.
They thought they’d buy $20k. They’ll be lucky to buy $30.
– Travis Kling (@Travis_Kling) December 26, 2020
Whether this price increase will continue, however, remains to be seen.