Big investors follow billionaire Ray Dalio in slamming bitcoin 'casino' as hedge funds pile in

Monday 30th November 2020

Heavyweight investors cast doubt over some predictions that the price could climb higher towards the end of year, claiming bitcoin is now in bubble territory

Bitcoin was on the verge of reaching a record high $20,000 earlier this week, but the cryptocurrency's sharp rise was cut short after its price fell by almost 11% on 26 November -- one of the biggest declines since March.

Heavyweight investors have begun to cast doubt over some predictions that the price could climb higher towards the end of year, claiming bitcoin is now in bubble territory.

Mark Mobius, the veteran emerging markets fund manager, told Financial News: "Trying to predict the price of Bitcoin is a loser's game."

Mobius said bitcoin's current price level is "based on no reliable information", adding its rise is a "casino operation based on all sorts of rumours and speculation".

The skeptical comments follow those of billionaire investor Ray Dalio, founder of hedge fund outfit Bridgewater Associates, who last week took to Twitter to lay out his "problems with bitcoin".

Dalio argued bitcoin was "not very good as a store-hold of wealth" due to its volatility, and that if it threatened established currencies governments would "outlaw it".

READ Is Ray Dalio missing a trick on Bitcoin? Can Twitter change his mind?

"I can't imagine central banks, big Institutional investors, businesses or multinational companies using it. If I'm wrong about these things I would love to be corrected," Dalio tweeted.

However, some have claimed it may be professional investors, rather than retail investors, who are pushing the price of bitcoin higher. Many institutional investors sat on the sidelines when bitcoin posted its first big rally in 2017, reaching $19,783 before collapsing to as little as $3,248 in late 2018.

Laurent Kssis, managing director at 21Shares, told FN on 20 November that institutional investors were responsible for a sharp increase in inflows into its bitcoin exchange traded product.

The ETP is receiving creations -- the equivalent of inflows -- of as much as $3 million a day. In November last year, it took all month to attract the same amount of new money

READ Hedge funds, not hipsters, may be powering bitcoin's second big rally

Others claim retail investors are still making a play for bitcoin, encouraged by the latest rally.

Vitali Kalesnik, director of research for Europe at Research Affiliates, the US asset manager, said the recent surge experienced by bitcoin "very much looks like a bubble".

He added: "The price levels this week were flirting with the all-time high. Usually to get to that level, buyers would expect some short term gains might be possible.

"What fuels that is the possibility of a lottery like payout, or the price doubling or quadrupling. These expectations generally fuel the bubble."

"Travelling to Monaco or Las Vegas is hard this year, so many people are just putting their money to play on the markets and bitcoin is one of those places."

To contact the author of this story with feedback or news, email David Ricketts

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