Hence the confusion of Dalio, who wondered this week if he was “missing something” after dubbing Bitcoin a bubble back in 2017. Nothing had fundamentally fixed Bitcoin’s weakness as a currency or store of value, he says, and if it ever became a threat to governments and central banks it would be keelhauled by regulators. He has a point: Bitcoin still looks like an asset with bubble-like price dynamics, exaggerated by the artificial scarcity of its 21-million supply cap and a “HODLing” mentality among its acolytes, who hoard an estimated 60% of outstanding coins.

Sure, you could call a lot of things bubbles, including stock markets supercharged by Tesla Inc. and blank-check SPACs. But the unique power of Bitcoin hype is demonstrated when celebrities such as JK Rowling and Maisie Williams ask publicly for crypto tips on Twitter. The likes of Novogratz and Elon Musk are happy to offer bullish advice.

Given this exuberance, does the 2020 price spike mean a 2021 crash? Not necessarily. But the forces that drive Bitcoin’s price aren’t as straightforward as its defenders insist. Novogratz feels this year is a milestone: “We’ve crossed the Rubicon … Bitcoin is now an asset,” he said in August. But it will take more than a second trip toward $20,000 to truly convince big banks and consumers that it’s a stable one.

Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.

First « 1 2 » Next