Allianz Global Investors believe it is just a matter of time when the cryptocurrency bubble will burst. They deem digital currencies to be worthless in near future despite benefits of the blockchain technology for the investors. Allianz Global Investors currently controls nearly 500 billion Euro, being the investor of the biggest insurance of Europe.
Allianz Global view on Cryptocurrencies
In a recent web post, Stefan Hofrichter, the head of global economics and strategy of Allianz Global mentioned the following;
In our view, its intrinsic value must be zero… A bitcoin is a claim on nobody – in contrast to, for instance, sovereign bonds, equities or paper money – and it does not generate any income stream.
Some may argue that the point Hofrichter makes is valid for Gold as well, being merely a metal. But Bitcoin has only been here for less than a decade, while Gold managed to keep its store of value for over 2,500 years.
Hofrichter considers Bitcoin craze as a text-book like bubble “one that is probably just about to burst”. According to him, the leading digital currency of the world “ticks all of the boxes” including over-trading to clearly pass as an asset bubble. Hofrichter, alongside with other reviewers show doubt on the actual value of cryptocurrencies. Researchers at the University of Pittsburgh concluded digital currencies as “an asset which has no value by traditional measures”. The economist, Nouriel Roubini stated that it is the “biggest bubble in human history”.
On 14th March 2018, at 1:10 PM CET the value of Bitcoin is 8,590 USD according to bitfinex.com trading platform. Bitcoin has more than halved in value since the peak in December 2017. Today’s announcement of Google on the ban of online advertisements promoting digital currencies and initial coin offerings (ICOs) from June 2018 could result in further fluctuations in cryptocurrency prices.
Impact of the Bitcoin bubble
According to Hofrichter, the Bitcoin bubble burst will not have any major impact on stocks and bonds asset classes;
Bitcoin’s demise would have few spillover effects on the ‘real world’, since the market for this cryptocurrency is still quite small in size… As a result, we believe that the risks to financial stability stemming from bitcoin are negligible — at least as of today.