Bitcoin overtakes ‘long tech’ as most crowded trade: BofA survey

LONDON (Reuters) – A long position on bitcoin overtook “long techâ€� as the trade fund managers said was the most crowded in January, Bank of America’s monthly fund manager survey showed on Tuesday.

For the first time since October, a long position on technology companies was knocked off the top spot, as investors said that long bitcoin was the most crowded trade. A short position on the U.S. dollar was seen as the third most crowded.

In a similar survey by Deutsche Bank, investors said bitcoin was in a bubble, with 56% of the participants saying the cryptocurrency was more likely to halve in value in the next 12 months.

Bitcoin hit $40,000 earlier this month, rallying more than 900% since a low in March. It topped $30,000 for the first time on Jan. 2, having breached $20,000 on Dec. 16.

A steeper yield curve was expected by a record 83% of BofA investors – that’s more than after the 2008 Lehman Brothers collapse, the 2013 U.S. Federal Reserve’s “Taper Tantrumâ€� or after the 2016 U.S. election. The expectation of higher bond yields was at or close to all-time highs.

A record 92% of investors surveyed by BofA expected higher inflation over the next year.

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Investors were bullish on the outlook for global growth: the proportion of fund managers surveyed by BofA who said that the global economy is in an early-cycle phase, as opposed to a recession, was at its highest in 11 years.

A record 19% of investors surveyed said they are currently taking more risk than normal. The fund managers surveyed by BofA manage a total of more than $500 billion in assets altogether.

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The top tail risks to the economy were thought to be problems with the vaccine rollout (30%), the Fed easing its asset purchases (29%), and a Wall Street bubble (18%).

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Elsewhere, underowned UK equities saw some money flowing in. But at 15% underweight it remained pinned as the number one underweight region, BofA said.