Is Bitcoin in a Bubble? Experts Say Yes

December 4, 2017 James Heinsman In the News

As the value of one bitcoin explodes past $11,000, some in the hedge fund community are bad-mouthing the rise of the mysterious cryptocurrency.

Ken Griffin, founder and CEO of the Citadel hedge fund, compares the recent blast-off of bitcoin to the infamous tulip bulb bubble in 17th century Holland, also known as “tulipmania.” Griffin believes that the reason for bitcoin’s sudden rise is the likelihood that people are confusing the currency with the technology that supports it, called blockchain.

He explained that the financial industry has been investing in blockchain technology, believing that its future will have profound social implications on finance. Blockchain creates fast, safe and permanent transaction records without the need for third parties like banks getting involved. Griffin added that large corporations and financial institutions are experimenting now with blockchain technology to hopefully improve global payments and the management of supply chains.

Bitcoin is different than blockchain, and Griffin thinks people don’t realize that difference. He is worried that people who are now rushing to buy bitcoin don’t know what they are doing, anxious to get on board the fast-moving train to prosperity.

Griffin did not say bitcoin is a fraud, as some other pundits have ventured, but he does insist it is a bubble that is sure to burst, hurting many people along the way.

Others joining Griffin in the bubble chorus are Jim Cramer, former hedge fund manager, writer, and host of Mad Money, and Nouriel Roubini, and professor of economics at the Stern School of Business at NYU, who said last month that bitcoin was a “gigantic speculative bubble.”

Chief Investment Officer at Japan Post Bank, Katsunori Sago, also said the price of bitcoin is a bubble, claiming that the real price for one bitcoin should be closer to $100. Severin Cabannes, Deputy CEO of Societe Generale, and TidjaneThiam, CEO of Credit Suisse, are of a like mind with Griffin. Warren Buffet, the iconic investor, is quoted as saying that bitcoin’s price gains this year is a real bubble.

There is at least one expert that says bitcoin is nothing but a fraud; JP Morgan Chase CEO Jamie Dimon. James Gorman, CEO and chairman of Morgan Stanley is quoted as saying that bitcoin “doesn’t deserve the attention it is getting.”

Yet, there are respected investors who are investing in bitcoin and also starting cryptocurrency funds. The largest exchange for derivatives, CME is planning to introduce bitcoin futures this month.

bitcoin, blockchain, bubble, Citadel, Jim Cramer,

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