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Bitcoin Doesn’t Belong in Institutional Portfolios, Says Nouriel Roubini After Tesla Investment

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American economist Nouriel Roubini launched another scathing attack on Bitcoin as the cryptocurrency gained entry into the Fortune 500 carmaker Tesla’s balance sheet as an alternative reserve asset.

A long term Bitcoin skeptic, Mr. Roubini said the “volatile” cryptocurrency does not belong in serious institutional investors’ portfolios, adding that people should not get inspired from Tesla and MicroStrategy—a Nasdaq-listed firm that holds more than 70K BTC—and buy Bitcoin as protection against fiat devaluation and inflation.

“There is [a] growing demand for safe-haven assets that are a hedge against inflation, currency depreciation, and debasement and tail risks. Gold, inflation-indexed bonds, commodities, real estate, and even equities are all reasonable candidates.”

wrote Mr. Roubini in his opinion editorial on the Financial Times.

Tesla’s In For Bitcoin Shock?

The statements matched sentiments with what JPMorgan strategists discussed in their note to investors on Tuesday. The analysts noted that Bitcoin’s intrinsic price volatility may turn away potential institutional investors from pursuing it as a serious store-of-value asset. Instead, they would stick to their stable cash reserves.

“The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of Bitcoin,” strategist Nikolaos Panigirtzoglou wrote, adding that corporate treasury portfolios typically contain bank deposits, money market funds, and short-dated bonds. Their annualized volatility hovers around 1 percent.

But in Bitcoin’s case, even a 0.1 percent allocation could spike the volatility to 8 percent.

Mr. Roubini reiterated some of his previous concerns about Bitcoin that could—per his opinion—put investors at risk. He highlighted the 2017-18 boom and bust cycle that saw Bitcoin jumping from $1,000 to $20,000 in a year, only to crash back to near $3,000 in 2018.

“Since the fundamental value of bitcoin is zero and would be negative if a proper carbon tax was applied to its massive polluting energy-hogging production, I predict that the current bubble will eventually end in another bust.”

the economist added.
Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin boom-and-bust cycles. Source: BTCUSD on TradingView.com

Bitcoin slipped on Wednesday, falling below $45,000 on intraday profit-taking sentiment. Many analysts, including Bloomberg Intelligence’s Senior Commodity Strategist, Mike McGlone, believes the cryptocurrency would hit $50,000 in the coming sessions.

BTC/USD was trading at $45,170 at press time.

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Yashu Gola

Yashu Gola is a Mumbai-based finance journalist. He is profoundly active in the bitcoin space since 2014 – and has contributed to several cryptocurrency media outlets, including CoinChapter, NewsBTC, FxDailyReport, Bitcoinist, and CCN. Academically, Yashu holds a bachelor's in information technology, with majors in data structures and C++ programming language. He has also won the 'Atulya Award' for his efforts towards raising $100,000 for an India-based farming project.

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