Bitcoin has repeatedly set new high speeds, refreshing investors’ perceptions day by day. Just as investors were frantically throwing money into the world’s largest digital currency through various channels, Bank of America asked this question: When will Bitcoin peak?On Friday, Bank of America analyst Michael Hartnett wrote in a report:
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In the past two months, Bitcoin has skyrocketed by 180%, and the market value of the entire digital currency market has exceeded $100 billion.
If we visualize the bubbles of the last few decades, there is no doubt that Bitcoin is the “mother of bubbles.”
So, will Bitcoin’s crazy rally continue?
Nobody knows. But in order to hedge, Hartnett put forward several warning signs of liquidity drying up.
He explained that if there is a bear market in 2021, the direct cause will not be the decline in corporate profits, but the change in interest rates. Therefore, including investors who invest in Bitcoin, pay special attention to the clues of bearish market risks hidden in interest rate changes.
Hartnett believes that the first thing that may bring liquidity risks is that the US investment-grade corporate bond ETF LQD fell below $133 and/or leveraged loans began to significantly outperform the market.
Second, due to weak economic growth in Europe and Asia, the US dollar unexpectedly strengthened.
The third is that inflation has exceeded expectations. At present, food prices in the United States have reached a six-year high, rising by 20% in the past eight months.
Finally, the market bubble is too big to bear, and speculative funds have withdrawn.
Hartnett warned that the bubble burst is still the biggest bull market risk:
Over the past ten years, the US market has been very liquid, but technological innovation has been interrupted. The huge inequality and social division caused by these factors may cause serious problems.
Not to mention, the size of US financial assets has now reached 6 times the US GDP.
Hartnett believes that Bitcoin’s continuous record high is just one of the manifestations of the largest asset bubble in history:
Whether it is an IPO or a digital currency, investors’ investment motives are becoming more and more speculative, and the income of some investors is staggering.
But the extreme asset bubble also means that the vain bull market in the past decade is about to end naturally; the risk asset price bubble ignores factors such as rising interest rates.
Whether the current asset prices are in a bubble or not, we will know at the end of the first quarter of this year.
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