Investments  

Market veterans blast Bitcoin 'bubble' amid dizzying high

Market veterans blast Bitcoin 'bubble' amid dizzying high

Bitcoin’s rise in value displays all the characteristics of a speculative bubble, according to fund managers Richard Buxton and Neil Woodford.

Bitcoin, a virtual currency, was priced at below $1,000 (£745) at the start of the year and has rocketed to more than $16,000 (£11,992) since then.

Mr Buxton, chief executive at Old Mutual Global Investors and manager of the £2.3bn Old Mutual UK Alpha fund, dismissed talk of a bubble in equity markets, but said the “lunacy” of Bitcoin is displaying similar conditions as seen in bubbles.

Mr Woodford, who runs the £8.1bn Woodford Equity Income fund among a range of other mandates, said he thinks there is a general bubble in the riskiest assets, including some parts of the equity market, high yield bonds, and bitcoins.

He said a typical characteristic of a bubble is when undervalued assets are ignored as investors chase the most fashionable assets of the day, which promptly move to valuations that are not justified by fundamentals.

Adrian Ash, director of research at BullionVault, said demand for gold is at a multi-year low from new investors.

He said this decline in demand for gold as an asset class has corresponded with the rise of bitcoin.

He said: “Whether or not bitcoin ever achieves common use as money, the crypto-currency plainly offers investors a hot speculation and not a safe haven right now.

"Bitcoin's fresh record highs have come alongside new historic highs in the stock market, led by stretched valuations in tech shares.

"The ultimate investment insurance of physical gold in contrast is trading flat in line with its 5-year average.”  

David.Thorpe@ft.com