Cryptocurrencies are in a ‘bubble’

Manama : As tech-savvy investors, in hopes of doubling, tripling or even 5 to 10x their investments within weeks, or in some cases, days, are quickly adopting virtual currencies, an expert here has warned that “cryptocurrencies are in a bubble”.

CEO of NEC Payments Andrew Sims told DT News that he is “convinced that digital currencies similar to Bitcoin are in a bubble.”

A ‘devaluation’, Sims said, is on the cards. “Over a period of time, I think the current scenario will change, but I don’t know when it will happen?”

But he was quick in saying ‘NO’ when asked: “If he would invest in cryptocurrencies?”

The answer was, “Not at this point in time. Not as a speculative investment.”

“Would I invest in distributed ledger technologies that use cryptocurrencies for specific use cases? Absolutely. But I am not in the Bitcoin Gold Rush.”

But even as the experts warn about bitcoin as a bubble waiting to burst, Bahrainis, like many other disciples of the cryptocurrency, are continuously getting lured to the fastest-growing asset in the world this year. 

Bahraini investors have reportedly invested heavily hoping to bag huge profits, as the bull market continues to rally with only occasional slumps. 

Bitcoin has grown exponentially since its launch in 2000, going from a few cents to over 19,000 at its all-time high in recent months, other currencies such as Etherium, Litecoin and Ripple have matched Bitcoin’s growth in just a year.

Many investors told DT News that they prefer alternate cryptocurrencies to Bitcoin considering their quick and bigger growth potential. For it is an opportunity for them to better their lives, even as regulators are likening the market to gambling. 

“I invested in, a few months ago, in Ripple and it has tripled in value,” said an excited Khalid to DT News. He said he has invested around a quarter of his savings in Ripple.

Ripple, Khalid said, has grown 2000% in recent months. “They have partnered with MoneyGram and is also expected, as the rumours say, to join hands with Mastercard and other top banks in the near future. “So things are getting exciting at this very moment,” he said. 

Azeez, another investor, said: “I choose Bitcoin as I believe in the technology.” “It’s going to transform the way we live our lives, and I believe its here to stay.”

“I have seen my investment grow, it’s a perk of being an early investor,” added Azeez, who started investing in crypto in November
last year. 

He added that he has invested in other currencies such as Dash, Litecoin and Ether which has also seen a significant upward trend.

However, according to experts, the cryptocurrencies which are other than Bitcoin referred to as ‘alt-coins’ is a riskier investment than Bitcoin, which has the first mover advantage.

According to CEO of NEC Payments, Andrew Sims digital currencies similar to Bitcoin are also in a bubble. 

However, he said that cryptocurrencies are not something to be dismissed entirely. “Anything that is not based on a physical asset and grows that quickly is in a bubble. Does it mean that cryptocurrencies are an invalid proposition?” “No, it does not.” “But there is a huge amount of speculative hype around bitcoin at this moment, that is over-inflating the value,” he said.

South Korean concerns 

Meanwhile, in another development, South Korean regulators have made clear that they are going to  “propose outright bans on trading.” Reports say South Korea accounts for 15 per cent of global bitcoin trading. 

The announcement by the South Korean justice minister, Park Sang-ki, sent global bitcoin prices temporarily plummeting and virtual coin markets into turmoil. Reports say investors are selling off Bitcoin, Ripple and Etherum on South Korea concerns. 

By 3 pm yesterday the coin price is down at $13,866 (£10,142). Ethereum is $1,281 (£937). Ripple is at $2.08. And shortly after it was back again at $14,000. 

This, according to experts, is also an indication that investors have digested reports of the trade ban. Experts opine that what the country actually trying is to ban anonymous trading, not the trade in general. 

However, South Korea is not alone in this struggle or fight to regulate or tax cryptocurrencies. 

In September last year, China cracked down on cryptocurrency trading, citing what officials saw as broader risks to the country’s economy.