Bitcoin has significantly captured the imagination of investors worldwide in the last few weeks. The cryptocurrency surged past $18,000 after it began trading on Chicago board options exchange (Cboe) on Sunday, the latest in a series of highs that have excited some investors while leaving others nervous of a bubble. However, here is something knowing what will add to your fears if you are invested in the virtual currency. According to a report in Bloomberg Businessweek, an estimated 1,000 people own about 40 percent of the world’s total bitcoin, for an average of about $105.6 million per person. What does it mean for an average investor? These 1,000 people can influence and decide the future of your investments in Bitcoin. The Bloomberg report says, “As in any asset class, large individual holders and large institutional holders can and do collude to manipulate the price.” It becomes all the riskier since Bitcoin’s value isn’t dependent on any underlying asset.
Legendary investors from India and around the world have time and again cautioned investors to stay away from it. Thomas Carper, a senior United States Senator once remarked, “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.”
No fundamental value
Legendary investor Warren Buffett had said in an interview to CNBC in 2014 that bitcoin is a “mirage”, adding that investors should “stay away from it”. In the same interview, Warren Buffett said, “It’s a method of transmitting money. It’s a very effective way of transmitting money and you can do it anonymously and all that. A cheque is a way of transmitting money, too. Are cheques worth a whole lot of money just because they can transmit money?… The idea that it has some huge intrinsic value is just a joke in my view.” Reiterating his belief on Bitcoins and cryptocurrencies, Warren Buffett told Marketwatch in October this year: “You can’t value bitcoin because it’s not a value-producing asset,” adding that it is a “real bubble in that sort of thing”.
The rapidly surging price of Bitcoin, without any underlying asset or value-base, has irked the top banker Jamie Dimon. “Bitcoin is a fraud and will blow up,” Jamie Dimon, the CEO of JPMorgan Chase, said earlier this year, adding, “The currency isn’t going to work.” He pointed out to the absence of an underlying monetary base to support its value. “You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” Jamie Dimon said.
Renowned investor Jim Rogers, sometimes referred to as commodities guru, too has sounded a note of caution on the prospects of cryptocurrencies, preferring to stay away from them for now. “I wish I was smart enough to buy cryptocurrencies.” Jim Rogers said in a recent interview with Kitco news. Further, Jim Rogers seemed to suggest that there might be a bubble building up in the cryptocurrency space. “It looks bubblish when you see the kind of price we see in bitcoins,” Jim Rogers said, adding that he doesn’t own any of the cryptocurrencies. “I certainly don’t know which one will come out on top, or if anyone comes out on top. But, I don’t own any.”