Bitcoin: boom or bubble?

Ask 10 different financial experts about the future of Bitcoin, and you’ll get 10 different answers. Here’s the good, the bad and the outright ugly – and why you shouldn’t go mortgaging your house to invest in it like others have.

The price of a single Bitcoin has skyrocketed more than 1700% since the beginning of the year. But those kinds of returns don’t come without their risks.

Here’s what 10 different financial experts have recently predicted on the future of Bitcoin.

1. “Whether it’s a fraud…”

Ed Tilly, chief of Chicago Board Options Exchange (Cboe)

Cboe, the world’s largest options exchange, launched Bitcoin futures trading on Monday morning (AEST). The launch marked the first opportunity for professional traders to invest in Bitcoin on a traditional platform.

“Whether it’s a fraud, whether it’s a bubble, whether it’s legitimate … you will be able to express all of those thoughts in a transparent market place,” said Tilly.

2. “Volatile.”

Zennon Kapron, managing director of Shanghai-based consulting firm Kapronasia

Kapron didn’t hold back when commenting on Bitcoin’s rollercoaster Wall Street debut.

“It is rare that you see something more volatile than Bitcoin, but we found it: Bitcoin futures.”

3. “Opportunities for fraud and manipulation.”

Jay Clayton, chairman of the US Securities and Exchange Commission

“There is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.”

Nonetheless, Clayton says the SEC is committed to promoting capital formation.

“The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing.”

4. “An environmental disaster.”

John Quiggin, professor at the University of Queensland’s School of Economics

“The most widely used estimate of the energy required to ‘mine’ Bitcoins is comparable to the electricity usage of New Zealand. If allowed to continue unchecked … Bitcoin mining will become an environmental disaster.”

5. “Extreme volatility … Invest responsibly.”

Brian Armstrong, co-founder and CEO of Coinbase – the largest crypto exchange in the US

“We at Coinbase couldn’t be more excited by the explosion of interest in digital currencies. (But) it does create extreme volatility and stress on our systems.

“Digital currencies are volatile and the prices can go up and down. Please invest responsibly.”

6. “Bitcoin is gold 2.0.”

Cameron and Tyler Winklevoss, Bitcoin investors and founders of the Gemini Exchange

“We think Bitcoin is gold 2.0,” said Cameron.

The identical twins, who sued Facebook founder Mark Zuckerberg, invested $11 million in the digital currency several years back.

“It’s a store of value, so today it’s about a $US300 billion market cap, gold is at $US6 trillion, so we think it could very well go up another 20 times from today.”

7. “The bubble to end all bubbles continues.”

Paul Donovan, global chief economist for Swiss financial services firm UBS

“Cryptocurrencies only have value if accepted as currencies. However, they cannot be used for the most important transaction in an economy, and cryptocurrency supply can only rise and never fall – making them a poor store of value.”

8. “Bubble-like valuations.”

Belinda Boa, head of active investments for BlackRock Asia-Pacific

“We are seeing sort of bubble-like valuations. BlackRock’s view is that this isn’t a financial asset like we would trade in terms of equities and fixed-income instruments.”

9. “Bitcoin is a good diversification tool.”

Thomas Lee, head of research at Fundstrat Global Advisors

“We believe investors should have exposure to blockchain, particularly given Bitcoin has essentially zero correlation to equities, bonds and commodities.

“But this is impractical for many equity managers, given the parameters of their mandate.”

Instead, Lee – one of the most prominent advocates for Bitcoin on Wall Street – recommends investors look into stocks that offer Bitcoin leverage.

10. “Bitcoin may collapse tonight…”

Michael McCarthy, chief market strategist at CMC Markets

“The anonymous and unregulated use of cryptocurrencies was the initial driver of their success.

“If they become mainstream financial instruments, they may alienate the original users. Here may lie the seeds of crypto destruction.

“No one can say with certainty when, or at what price, a bubble will burst. Bitcoin may collapse tonight, or it may reach US$100,000 (AU$133,000) first.”

Still tempted to roll the Bitcoin dice?

With the majority of financial experts recommending caution – including Bitcoin exchange CEOs themselves (quote number 5) – it’s important that any approach you take is measured, disciplined, and above all us, one you and your family can afford.

So always seek professional advice before you do anything rash – which obviously includes mortgaging the family home!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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