Bitcoin in a bubble, not equities: BofA Securities fund manager survey
Premium- Bitcoin was the second most-crowded trade after technology stocks, with 10% of respondents expecting the former to outperform other asset classes
The latest global fund manager survey by BofA Securities showed that 74% of fund managers think bitcoin is just a bubble. This despite the cryptocurrency soaring to new highs in the backdrop of increased adoption by institutional investors.
In the past one year, the price of bitcoin has risen many folds from around $10,000 to beyond $63,000. Interestingly, the survey comes at a time when Coinbase, the largest cryptocurrency exchange, has made its stock market debut on the Nasdaq.
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The survey report also pointed out that bitcoin was the second most-crowded trade after technology stocks, with 10% of respondents expecting the former to outperform other asset classes. While the 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 survey see equities in a bubble. 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 buoyed by hopes of faster global economic recovery and corporate profits. Around 85% of fund managers expect global profits to improve over the next 12 months.
As for the risks, a tantrum in the bond markets is seen as the biggest tail risk by global fund managers.
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