Bitcoin and speculative crypto assets

Wells Fargo: Bitcoin and speculative crypto assets

Bitcoin and cryptocurrency are more speculative assets than investment products, this is what a Wells Fargo survey on investment strategies reports.

This is the incipit of the section dedicated to Bitcoin:

“2020 was a wild and crazy year, so it’s only fair that the best performing group of assets in 2020 should have the craziest name – cryptocurrency”.

The report analyses Bitcoin’s performance, defining it as the best, but also the most volatile. Bitcoin in fact gained 170% in a year, doing even better than 2019 when it by Ethereum Code closed with +90% compared to 2018.

However, explains Wells Fargo, cryptocurrencies do a lot of talking about themselves but that doesn’t mean they are also able to attract capital. In fact, they write, market capitalisation is $560 billion, which is a quarter of that of the technology companies listed on the S&P 500 with the largest market capitalisation.

The aim of the report actually seems to be to downplay the value of Bitcoin because of its excessive volatility.

The chart in the report shows that yes, Bitcoin has performed better than gold and the S&P 500 since 2017, but Wells Fargo’s analysts invite us to note the “volatile journey” that Bitcoin investors have had to endure for three years.

Bitcoin and cryptocurrency, more speculation than investment

In fact, John La Forge writes:

Until just two months ago, total three-year returns were more or less the same among the three assets, but the volatility was different. Investing in cryptocurrency today is a bit like living in the early days of the 1850 gold rush, which involved more speculation than investment.

The conclusion, however, seems to give confidence to the whole sector. John La Forge argues that cryptocurrencies can become a product to invest in one day. After all, in 12 years, they have gone from being worth nothing to a capitalization of $560 billion.

For this reason, the analyst argues:

“Fads don’t usually last 12 years. There are good reasons for this – reasons that every investor should feel. As we enter 2021, we will talk even more about the space of digital assets – in its positive and negative sides.

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