In brief
- The price of Bitcoin has tripled in three months.
- Most money managers surveyed by Deutsche Bank believe Bitcoin's price is more likely to drop 50% than double within the next 12 months.
- A BofA survey found Bitcoin to be the most crowded trade.
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There’s some good news and bad news for Bitcoin.
The good news: Almost half of the money managers surveyed in a monthly Deutsche Bank survey rated Bitcoin a 10! The bad news: That was on a 1-10 scale of how big a financial bubble it was.
Most survey respondents said the digital asset—as well as stock prices for electric automaker Tesla—were more likely to halve in value than double in the coming year.
Money managers are people or firms that buy and sell securities for clients. Because they have a fiduciary duty to manage their clients’ money well, their perspective provides hints at where the markets could go in the coming year.
And they think Bitcoin could be a bubble.
A bubble is when the price of an asset quickly grows higher than its inherent value, buoyed by the public picking up on investment trends as well as by media reports. The perceived value goes so high that it eventually “pops” and the price crashes.
Bitcoin enjoys a current price north of $36,000—triple what it was three months ago.
Michael Hartnett, Chief investment strategist at BofA Global Research, said earlier this month—when Bitcoin hit an all-time high above $40,000—that BTC was the “mother of all bubbles.” Several days later, the market corrected, scraping the $32,000 mark. It has since partially recovered.
Meanwhile, Tesla stocks now cost $844.55; they stood at $408 on November 16.
Also today, BofA released a monthly survey of its corporate clients, who were questioned from January 8 to 14. As reported by Bloomberg, respondents named Bitcoin the most crowded trade for the first time ever, meaning that many people are making similar bets on the price of Bitcoin rising. Crowded trades are often associated with bubbles.
Not everyone is sure the market is in bubble territory. Pantera Capital, a venture capital firm in the crypto space, released an investor letter last week that tied BTC’s price rise to the May 2020 Bitcoin halving—which slashed rewards for Bitcoin miners. According to Pantera’s Dan Morehead and Joey Krug, if historical trends hold, “Bitcoin would peak at $115,212 /BTC in August 2021.”