Bank of America Warns: There Might Be a Huge Bitcoin Bubble

Bank of America is predicting a "Mother of All Bubbles" for Bitcoin.

Inclusion Times
Inclusion Times

Bitcoin's recent rally, reaching an all time high of a valuation of more than $40,000 per bitcoin, has caused worry for a number of prominent financial analysts. They are now warning of a huge bubble. Michael Hartnett, chief investment strategist at Bank of America Securities, is among them. He likened bitcoin's recent rally to other bubbles, and emphasized the "increasingly speculative" investing behavior of bitcoin.

Last Friday, he explained that the recent highs in bitcoin's price might just be the result of a speculative mania, and said that the cryptocurrency looks like the mother of all bubbles. For the crypto's price rally in the last two months, Hartnett believes it was aided by violent inflationary price action.

Price chart showing bitcoin's price from 2019 to the present. Image Source: markets.bitcoin.com 

In comparing bitcoin's performance to other bubbles, he said bitcoin "blows the doors off prior bubbles". The other bubbles bitcoin was compared to include bubbles that occurred in the 1970s, 1980s, and 1990s. Gold prices bubble in the late 1970s, after prices surged more than 400%. Japanese Stocks bubble in the 1980s. And Thailand's stock market bubble in mid-1990s. He did also compare bitcoin's rally to the very infamous dot-com bubble in the late 1990s, and housing prices bubble in the mid-2000s. Hartnett explained that, before crashing down, those sectors had triple-digit percentage gains.

Hartnett did not say anything particularly about bitcoin's price dropping like other past bubbles. He just pointed out that the price surge is indicative or another example of an increasingly speculative investing behavior.

Others who have warned of a bubble include Nouriel Roubini (also known as Dr. doom) and David Rosenberg. Roubini is a professor of economics in New York University (NYU). In discussing the price of bitcoin, he was critical. According to him, bitcoin's price is completely manipulated by a bunch of people, by a bunch of whales, and has no fundamental value. Rosenberg who is the chief economist and strategist at Rosenberg Research said of bitcoin as a classic, follow-the-herd, extremely crowded trade.

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