Bitcoin trashed Bank of America Investopedia
Bitcoin,  Cryptocurrencies

On heels of Morgan Stanley boost, BTC trashed by Bank of America, Investopedia

BoA analysts say Bitcoin is ‘impractical as a store of wealth,’ while an Investopedia investors survey finds 62% believe it is in a price bubble

Shortly after Morgan Stanley gave Bitcoin an implicit endorsement and price boost to Bitcoin by offering some wealthy investors access to cryptocurrency funds, Bank of America analysts attacked it and a survey of sophisticated investors said the cryptocurrency was in a bubble.

According to financial news site The Street, BoA analysts on March 17 called Bitcoin “impractical as a store of wealth or payments mechanism,” adding, that there is no good reason to invest in Bitcoin “unless you see the price going up.”

In the report, “Bitcoin’s Dirty Little Secrets,” the analysts argued that those price rises were driven by nothing more than institutional investors like MicroStrategy, PayPal, and Tesla making a splash by announcing big purchases. It said: 

“[T]he main portfolio argument for holding Bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on Bitcoin demand outpacing supply.”

Beyond that, Investopedia editor-in-chief Caleb Silver told Fox News that an investor survey showed that while 20% had done “very well” by adding Bitcoin to their portfolios in the past year, nearly two-thirds—62%—believe BTC is in a price bubble.

“The only bubble they’re worried about is bitcoin,” Silver said. “They are not fearing a bubble in equities, they are not fearing a bubble in SPACs as much as they are fearing one in bitcoin and other cryptocurrencies.” That is, he added, for good reason:

“Those are up substantially higher and there’s no rhyme or reason they can point to. We all know there’s institutional appetite for it, but this very bullish crowd in general—they’re all-in on equities, they intend to invest more, they’ve as bullish as they’ve been in the last 12 months.”

That is, largely, what the BoA analysts argued in their new report, “Bitcoin’s Dirty Little Secrets.” 

In it, the analysts argued that those price rises were driven by nothing more than institutional investors like MicroStrategy, PayPal and Tesla making a splash by announcing big Bitcoin purchases. The report said:

“[T]he main portfolio argument for holding Bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on Bitcoin demand outpacing supply.”

The BoA analysts also pointed to the high environmental cost of Bitcoin, which has been getting more and more attention lately.

Because “hash power today is mostly in coal-fired Xinjiang, a link between prices, energy demand & CO2 means Bitcoin is tied to Chinese coal,” that report said that if bitcoin does hit $1 million—something Kraken CEO Jesse Powell recently called “very reasonable” in the next decade—”Bitcoin may turn into the world’s 5th largest [carbon dioxide] emitter, surpassing Japan.”

Nor will the ESG investment funds focused on companies with good environmental, social and governance records look at Bitcoin, the report said.

That matched comments made last month by BCA Research’s chief global strategist, Peter Berezin, who predicted that ESG funds would shun Bitcoin and companies that buy bitcoin. He said:

“Many companies have cozied up to Bitcoin in order to associate themselves with the digital currency’s technological mystique. As ESG funds start to flee Bitcoin, its price will begin a downward spiral. Stay away.”

Eventually, he said, this will cause bitcoin to lose “most of its value over time.”

The BoA analysts added that “a $1 billion fresh inflow into Bitcoin may cause CO2 to rise by the equivalent” of 1.2 million internal combustion engine cars.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.