Some of the world’s largest investors have indicated bitcoin is in bubble territory, with almost 30% predicting frenzied speculation will drive its price to $100,000 or more by the end of 2021.
According to a Procensus poll of 125 investors, managing more than $21tn between them, “fear of missing out” is cited as the most significant factor driving up bitcoin’s value in the past 12 months.
The cryptocurrency’s value soared by more than 400% during 2020. Since January it has posted further gains, breaching the $58,000 mark on 21 February — an increase which brought its market capitalisation to more than $1trn. However, bitcoin’s new record high was short lived, with it plummeting around 20% over the following two days.
It now trades at around $51,000 after news that Square, a US fintech owned by Twitter boss Jack Dorsey, has bought $170m.
Procensus, an online opinion sharing platform, put investors’ mean year-end price expectation for bitcoin at $60,000. However, some poll respondents, which include 20 of the world’s largest asset managers, believe it could rise by as much as 100% from its current valuation to $100,000.
Continued speculation over bitcoin’s price means 58% of investors believe bitcoin is now in bubble territory, although some still see a role for cryptocurrencies in institutional portfolios.
Just over a quarter of investors say bitcoin could act as both a store of value and inflation hedge, while around a fifth say there may be a place for cryptocurrencies in portfolios once volatility has dampened and liquidity improves.
The poll comes amid predictions that that some professional investors are warming to bitcoin following Tesla’s recent $1.5bn bet on the cryptocurrency.
Investment consultants, the gatekeepers that advise pension schemes on where to invest billions of pounds of assets, have begun taking a closer look at bitcoin following its recent surge in value and an influx of queries from clients who have been watching its rise from the sidelines.
Redington, the independent UK investment consultant, is among a cohort of advisers that is conducting research into a handful of asset managers that have already begun allocating money to bitcoin and other digital currencies, to weigh up the pros and cons of the fledgling asset class.
“Clients are interested in what our take on it is within a more diversified portfolio,” Tom Wake-Walker from Redington’s manager research team told Financial News recently.
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