Bitcoin is worthless, and its bubble is about to pop, according to a note published by Allianz Global Investors (AGI), the investment arm of insurance company Allianz. While AGI’s note was harsh on cryptocurrencies, it claims there’s potential in their underlying technology, blockchain.
AGI, which managed nearly 500 billion euros ($619 billion) worth of assets as of December, argued bitcoin “ticks all the boxes” to be considered a bubble-. Per the firm, it’s unregulated and it’s filled with fraudsters, while being overtraded and overvalued. This makes it a “text-book like bubble” in their eyes, one that’s about to burst.
The note, signed by AGI’s Head of Global Economics and Strategy Stefan Hofrichter, reads:
“What is the fair value of a bitcoin? 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.”
Hofrichter’s note further argued that bitcoin isn’t a good currency either, due to its high transaction costs and price volatility. To top it all off, it adds that the cryptocurrency is energy-inefficient, as mining it consumes a lot of electricity.
Blockchain technology, on the other hand, can “reduce significantly the costs of verifying transactions and networking,” the note states.
Bitcoin is worthless, won’t hurt “real world”
While Allianz Global Investors’ note takes a harsh stance against bitcoin, it claims that the cryptocurrency bubble bursting won’t affect the “real world.” This, as the cryptocurrency market is still “quite small in size,” when compared to conventional asset classes such as stocks and bonds.
Per the note, speculation around bitcoin and cryptocurrencies won’t end soon. While the risk bitcoin poses to financial stability are now negligible, they may presumably increase if speculation gets out of hand.
Overall, AGI seems not to consider bitcoin’s potential improvements. Technologies that aim to fix its high transactions costs or high energy consumption are being developed. Moreover, it brushes off gold comparisons, by claiming “gold has been widely accepted by humankind as a thing of value” for thousands of years, while bitcoin has been used for less than a decade.