Bitcoin and US tech shares are the largest bubbles available in the market proper now, traders say
In this photo illustration, a visual representation of the digital cryptocurrency Bitcoin (BTC) is arranged on a circuit board of a hard disk.
Yuriko Nakao | Getty Images
Bitcoin and US tech stocks are currently viewed by investors as the largest market bubbles, according to a survey published by Deutsche Bank on Tuesday.
The survey, based on responses from 627 market professionals between January 13-15, found that the vast majority of investors (89%) believe that some financial markets are in the bubble zone.
Of these bubbles, Bitcoin and US tech stocks top the list. Bitcoin is viewed as an extreme case, with half of respondents giving the cryptocurrency a rating of 10 on a bubble scale of 1 to 10.
U.S. tech stocks were seen as the next largest bubble, Deutsche Bank said, averaging 7.9 out of 10 and 83% of those who gave it a bubble rating of 7 or higher.
Investors also believe that bitcoin and electric car maker Tesla will fall rather than rise next year.
“When asked about the 12-month fate of Bitcoin and Tesla – a symbol of a potential tech bubble – the majority of readers assume they will halve rather than double from those levels, with Tesla being more vulnerable, according to readers” , so Deutsche Bank said.
Bitcoin has been on a wild ride for the past few months. The world’s largest cryptocurrency by market value hit an all-time high of nearly $ 42,000 two weeks ago before slipping sharply. It is up more than 800% from the March 2020 lows when the cryptocurrency went crater-like amid concerns about the coronavirus pandemic.
Bulls say the digital coin has been bolstered by increased interest from institutional buyers, as well as the perception that Bitcoin is an uncorrelated safe haven similar to gold. Skeptics, on the other hand, say Bitcoin is a speculative asset and a market bubble that could one day burst.
Tesla also saw a massive surge in its share price in 2020, stretching into the new year and crowning its CEO Elon Musk the richest person in the world. The stock is up more than 700% from 12 months ago.
And while investors believe Bitcoin, Tesla, and other US tech stocks are in the bubble zone, it’s not clear what exactly might “pop” those bubbles.
“Simple monetary situations” that support bubbles are likely to persist. 71% of respondents told Deutsche Bank they don’t believe the Federal Reserve will tighten policies before the end of 2021. However, a quarter of investors said economic growth or markets might force their hand.
More investors say coronavirus vaccine rollout is falling short of expectations (41%) than those who said it was better than expected (22%). A little more than half of the respondents said that life would have normalized again by the end of the year.