Bitcoin ‘in uncharted territory’ as investors warned ‘price volatility will continue’

Bitcoin sees price surge following Elon Musk endorsement

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The currency received a major value boost, reaching a new peak of $48,216 (£34,991), after Elon Musk’s firm bought into Bitcoin, and although it experienced a slight dip, its value was 25 percent higher than five days ago. Bitcoin is well documented as being a volatile currency, which experiences major highs and lows, making it a questionable investment for some financial experts. This inconsistency was best demonstrated earlier this year, when Bitcoin’s value soared to its highest ever levels in January, before sinking days later to its lowest price since March.

Despite warnings made about the currency’s future, including by Coinbase chief executive Brian Armstrong, others say the sky’s the limit for the cryptocurrency, with Ian Balina, the chief executive of Token Metrics, claiming in December “we’re now officially in uncharted territory”.

Mr Balina’s comments came after the currency had risen from $19,000 (£13,800) to $24,000 (£17,400) in a matter of days.

JP Thieriot, chief executive of California-based Bitcoin and cryptocurrency exchange Uphold, also welcomed its growth.

According to Forbes, he said: “I think low $20,000 (£14,500) is just the beginning.

“This upward trend is likely to continue for months to come, as investors continue buying into consumer-style digital platforms that offer greater access to these markets than traditional financial service providers do.”

But Mr Armstrong remained cautious, arguing he “cannot emphasise enough how important it is to understand that investing in crypto is not without risk”.

In a Coinbase blog, the expert said: “Crypto can be a volatile asset class. Often more so than the types of traditional financial instruments that most investors are used to.

“For example, this means that the market can move in either direction much faster than equity markets.

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“Like all asset classes, crypto markets will rise and fall over time. We’ll occasionally see strong market rallies where prices will rise quickly and aggressively.

“While we’re always excited to see increased interest in crypto, it’s also important to point out that this is not only a time of high volumes, but also price volatility.”

Gerald Moser – chief market strategist at Barclays Private Bank – also warned against investment in the currency.

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Speaking after Bitcoin’s peak this year, he concluded that it was “nigh on impossible to forecast” its price, making it “almost uninvestable from a portfolio perspective”.

According to Financial News, Mr Moser added: “With spikes in volatility that are multiples of that typically experienced by risk assets such as equities or oil, many would probably throw the cryptocurrency out of any portfolio in a typical mean-variance optimisation.”

Among some claims fired towards Bitcoin is that institutional investors were “significantly driving up” the currency’s value.

This allegation was branded “a bit delusional” by Adam Grimsley – an investment director at Aberdeen Standard Investments – who said: “This narrative of institutional investors increasing exposure is probably correct, but I don’t think it is anywhere near some of the anecdotal evidence that has been given by some people.

“It is only a fraction of the market that will be interested in this. It’s still a very small, limited section of institutional investors investing at this point.”

Green car firm Tesla’s investment, however, sparked anger among many within the industry, as it emerged Bitcoin uses more energy than Argentina each year, the Cambridge Bitcoin Electricity Consumption Index reported.

Bitcoin mining, which is the process of producing the currency, uses huge amounts of power and is created on “energy-hungry” computer hardware.

Critic Mike Butcher, an editor at Techcrunch, tweeted: “Tesla: Sells carbon credits to buy Bitcoin, which requires as much energy (not always Green energy) as a small country to mine.”

Britain’s Financial Conduct Authority (FCA) warned about Bitcoin: “If consumers invest, they should be prepared to lose all their money.

“Some investments advertising high returns from crypto assets may not be subject to regulation beyond anti-money laundering.

“Significant price volatility, combined with the difficulties valuing [Bitcoin] reliably, place consumers at a high risk of losses.” does not give financial advice. The journalists who worked on this article do not own Bitcoin.

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