As the price of bitcoin continues its rollercoaster ride, investors are feeling dubious about whether or not the cryptocurrency will ever become a stable asset. Don’t bet on it, says Brian Madden, senior vice president and portfolio manager at Goodreid Investment Counsel.
After crashing below the $10,000 USD mark for the first time since November — literally halving its value in a matter of weeks — bitcoin has surged over the past 24 hours to rise above $12,000. Those kinds of gyrations can make investors weak in the knees, and rightly so, says Madden, who spoke to BNN about two well-hyped spaces: cryptocurrencies and marijuana stocks.
“I think there are a number of equally defensible target prices [for bitcoin], anywhere between zero and a million dollars on this thing, which just shows how enigmatic it really is,” says Madden. “Is it a commodity? Is it a currency? Is it an asset? Is it the greatest Ponzi scheme of all time? Time will tell, but the volatility we’ve seen in bitcoin has been nothing short of remarkable.”
Bitcoin’s recent troubles are said to be linked to well-known currency trading site, Bitconnect, which announced that it would be closing its operations, sparking some degree of panic among currency owners who are fearing that they may not be able to gain access to or withdraw their digital assets.
Bitconnect’s impact on the crypto-market is drawing parallels to the 2014 shutdown of the then-dominant Mt. Gox cryptourrency exchange which reportedly lost hundreds of millions of its customers’ bitcoin either to hackers, to embezzlers or both. That event caused a loss of confidence in bitcoin, which shed half of its value in short order. Meanwhile, customers have yet to recoup their losses, as Mt. Gox’s bankruptcy proceedings continue to this day.
Madden says that the current bull run in the market is partly to blame for the public’s fascination with riskier sectors like cryptocurrencies and marijuana. “What happens after a long expansion is that risk appetite starts to run pretty hot, which it is right now. So, it’s always wise to take the long view and think about where you are in the cycle,” Madden says.
“But in the short term, the market, as you know, is a voting machine more so than a weighing machine, and there’s lots of votes being cast on both sides of [the bitcoin] issue,” he says. “I wouldn’t touch it with a ten-foot pole, frankly.”
Madden claims that although similarly at the risky end of the investment spectrum, marijuana stocks differ from bitcoin in that at least investors in that sector are dealing with companies that have a verified product and customer base, unlike bitcoin whose use-value has yet to be proven to any significant degree.
“The issue with the marijuana producers is what is the size of the market going to ultimately be, what will normalized margins look like,” says Madden. “We just don’t know and that’s why it’s the speculative corner of the market.”