Author: Founder and chief economist at Rosenberg Research, David Rosenberg, has doubled-down on his narrative that bitcoin, similarly to the stock markets, is in a massive bubble. He warned that another bear market could emerge, similarly to what transpired following the previous bitcoin bull run in 2017.
Bitcoin Is In A Bubble: Rosenberg
In a recent CNBC interview, the former top North American economist at Merrill Lynch said that he’s avoiding getting into bitcoin, especially after its impressive run that resulted in new records above $30,000.
He claimed that such a parabolic price increase in a relatively short period is “highly abnormal.” He went even further, saying that this is BTC’s “biggest market bubble.”
As such, he reaffirmed his stance from mid-December that bitcoin is an “extremely crowded trade.” Rosenberg also questioned the maximum supply of 21 million coins ever to exist, saying that when the asset reaches that cap, the protocol could be altered in order to produce more tokens.
Although he noted that governments are not responsible for bursting any bubbles, Rosenberg predicted that central bank digital currencies will eventually take over the market share of cryptocurrencies.
The economist further explained that BTC performed somewhat similarly during the last bull cycle in 2017. However, once the bubble exploded, the cryptocurrency went on a year-long bear market in 2018.
The Stock Bubble May Not Burst Soon
Rosenberg asserted that the stock markets are also in a bubble as the S&P 500 and the Dow Jones Industrial Average ended 2021 at all-time high levels, while Nasdaq came just inches away from a record. His research company concluded that stocks are about 20% to 30% overvalued “based on a whole bunch of different metrics.”
However, the economist said that stocks might not explode soon because of the global economic situation.
“What’s holding the boot together is basically zero interest rates. As long as rates remain where they are, unless we have a real dramatic pullback in economic activity, this bubble that we’re in is probably any time soon.”
Nevertheless, he warned investors wanting to get in these markets that they will be allocating funds in a bubble.
Instead of aiming to buy stocks and BTC, Rosenberg’s plan includes investing in areas that “are not bubbly and that have a lot of catch-up potential.” He named utilities and energy as such sectors.
Although gold also marked a new all-time high in 2020, he remains bullish on the yellow metal as it has “1/5th of the volatility that bitcoin does.”
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