After a multiyear pit stop, bitcoin prices are surging like never before.
The unabated price acceleration to a recent peak near a stunning $42,000 on CoinDesk has made true believers out of many staid Wall Street pros, who may have once turned their collective noses up at the digital-asset that has only been around for a little over a decade.
However, the extraordinarily parabolic move for bitcoin, which was at last check, up 2.5% on Friday at $40,202 has raised serious questions about bubbles, like the Tulip mania of the 17th century.
BofA Global Research in their weekly â€œThe Flow Showâ€� report dated Jan. 7, raised the question as to whether bitcoinâ€™s price move represents the â€œmother of all bubbles.â€� Check out the following chart that takes a stab at comparing the climb in asset against other assets over decades.
Of course, the chart doesnâ€™t go all the way back to the Tulip craze, where a single tulip commanded the same price, and often more, as a house during the peak of the Dutch craze from 1636-1637.
But BofAâ€™s point is well taken, bitcoinâ€™s are richly prized and comparatively are staging a precipitous climb that merits attention and, perhaps, caution.
So far in the first full week of 2021, bitcoin has already climbed nearly 37%. By comparison, the Dow Jones Industrial Average
is up a respectable, but more mundane, 1.5%, the S&P 500 index
is on track for a 1.6% gain and the Nasdaq Composite Index
has returned 1.4% thus far.
Bitcoinâ€™s rally this year has pushed up the collective cryptocurrency market capitalization to a record above $1 trillion and as BofAâ€™s Michael Hartnett and his team puts it, the rise, of the â€œcryptocurrency market now >$1tnÂ as Bitcoin past 2 years blows-the-doors-off prior bubbles.â€�
The gains appear to be far from over if you believe forecasts from JPMorgan Chase, whose researchers argue that the digital currency could be valued at $146,000 if bitcoin challenges gold
as a haven-like asset. That would certainly be worth a respectable house.
Of course, this isnâ€™t the first time that bitcoin has been referred to as a bubble.
In aÂ prepared testimonyÂ for a Senate Banking Committee hearing back in 2018, Turkish-born economist, Nouriel Roubini, said digital currencies are the â€œmother of all bubblesâ€� and, in fact, have entered an apocalypse.
Howard Wang, co-founder of Convoy Investments, also dubbed bitcoin the biggest bubble in history before its eventual collapse back in 2017.
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