Bitcoins may be selling like hot cakes, but global investors are wary of a bubble brewing there. The latest global fund managers’ survey by BofA Securities showed that 74% of fund managers think bitcoin is just a bubble.
The increased adoption of cryptocurrencies by institutional investors has translated into a massive rally in this asset class.
In the past one year, the price of bitcoin has risen by many folds from around $10,000 to more than $63,000 recently.
Interestingly, the findings of the survey coincide with the stock market debut of Coinbase, the largest cryptocurrency exchange, on the Nasdaq.
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According to the survey report, bitcoin was the second most-crowded trade after technology stocks, with 10% of the respondents expecting the former to outperform other asset classes.
While bitcoin’s returns may be mouth-watering, the meteoric rise of cryptocurrency should be taken with a sack full of salt.
“Today, bitcoin and ethereum hit new all-time highs of 63,200 BTC/USD and 2,230 ETH/USD, respectively, bringing the crypto market into unknown territory. Positive signs from miners and likely the first publicly-traded company to pay the board of directors in bitcoin contribute heavily to this unknown territory,” Mads Eberhardt, cryptocurrency analyst at Saxo Bank, said in his blog on 14 April.
“The question which should be raised in this context is what happens the day the table turns, and miners start selling their increased bitcoin position,” he added.
On the other hand, only 7% of those surveyed see the US equities in a bubble.
Whereas 25% of the respondents think it is in an early-stage bull market, 66% view this current up move in US equities as a late-stage bull market.
Further, the survey report pointed to a continued risk-on mode, with net overweight allocation to equities rising to close to an all-time high of 62%.
The optimism surrounding equities has remained largely intact among global investors, aided by hopes of a faster global economic recovery and rising corporate profits.
Around 85% of fund managers are expecting global profits to improve over the next 12 months.
Besides, despite some countries struggling to contain the pandemic, covid is not among the top three risks. A mere 15% of those surveyed were worried about it.
Global fund managers see the tantrum in bond markets as the biggest tail risk to their portfolios, followed by inflation and high taxes.