bitcoin bursting bubble

Bitcoin’s popularity grows, but so do expectations of a bursting bubble

While a Bank of America survey found trading bitcoin’s popularity booming, Deutsche Bank found strong agreement among money managers that BTC is a bubble about to burst

Buying Bitcoin has grown so popular that it fund managers called it the most crowded with traders, knocking tech stocks out of its top spot.

That was according to a Jan. 19 Bank of America survey cited by Reuters. A Deutsche Bank survey of money managers also released today was not nearly as upbeat, with nearly half calling bitcoin’s price a bubble likely to burst soon. 

They were emphatic in this opinion, with 90 percent calling the cryptocurrency one of many financial bubbles they foresee popping soon. Even among those, Bitcoin was in a class by itself, with half of the Deutsche Bank respondents giving it a 10 on a 1-to-10 bubble scale.

Beyond that, the Deutsche Bank survey saw good economic conditions for bitcoin, notably predicting that the U.S. Federal Reserve will continue its stimulus program—printing money—that has been devaluing the dollar and helping Bitcoin’s popularity with mainstream investors. And 92% of the Deutsche Bank money managers expect to see inflation grow in 2021.

In that vein, the BoA survey found that shorting the dollar was the fund managers’ third most popular trade, indicating that they also expect the dollar’s value to keep falling. 

Bitcoin continues to grow, reaching an all-time high of about $42,000 earlier this month—up more than 900% since March.It is currently priced near $37,000. This historical rise is happening with the participation of institutional investors who for the first time seemingly bought into this new asset class.

As Modern Consensus reported earlier this month, philanthropist Bill Miller suggested that the United States dollar’s inflation could expand this trend, pushing Bitcoin’s price much higher. He said during an interview:

“If  inflation picks up, or even if it doesn’t, and more companies decide to diversify some small portion of their cash balances into Bitcoin instead of cash, then the current relative trickle into Bitcoin would become a torrent.”

The surveys follow yesterday’s reports that the director at asset management firm CCB International Securities, Mark Jolley, said that the firm sold one-third of its gold for Bitcoin.

Jolley also talked extensively about inflation, noting the bond market sets the dollar’s inflation expectancy at 2% but he expects inflation to be “moderate” this year, and warns that it “may become much more of an issue in 2022.”

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Adrian is a newswriter based out of Pisa, Italy. He's passionate about cryptocurrency, digital rights, IT, tech and futurology and likes to think about the future in a positive way.