Behavior, Investment Philanthropy to Dictate Crypto Prices
Personal as well as financial behavior and investment philanthropy will ultimately guide the price of Bitcoin and other cryptocurrencies, not rational considerations, according to Peter Lundgreen, CEO of Denmark-based financial advisory firm Lund Green Capital.
The company also manages Lundgreen’s China Fund -- a Luxembourg-listed vehicle that buys into carefully selected value and growth stocks in addition to bonds.
Lundgreen stated in an article posted on the company’s website:
“Concerning the true cryptocurrencies, my assessment remains that some people collect rare stamps, and some may collect rare digital currency blips in the future… And as always, any pricing is solely based on the buyer's interest in an item - but right now it does not matter as long as the neighbor is ready to pay more than you are.”
Bitcoin vs. Tulip Craze
According to Lundgreen, it is easy to draw a parallel between the tulip craze in 1637 and the exponential growth of Bitcoin and cryptocurrencies. However, there are specific factors to consider, such as the unstable market conditions in the Netherlands when the tulip bubble occurred. Nowadays, there are the radical changes in the financial system that blockchain is promising, he added.
Before the tulip bubble burst, futures traders knew the number of available plants because farmers could control the cultivation of the bulbs and were aware of the delivery and transportation time, which made the market predictable. More importantly, the supply of tulip bulbs was infinite and that probably resulted in the price crash.
For Bitcoins, however, the number is limited to 21 million. The cryptocurrency was further legitimized last month, when CME Group and the Chicago Board Options Exchange (CBOE) launched Bitcoin futures trading on their platforms.
"The fact that Asian investors have strong participation in the market is an indication of high short-term activity which also generates leveraged investments. I have noticed that 50 and 100 times leverage is not impossible. These factors must be included when assessing how stable, or liquid, the underlying market is.”
Lundgreen pointed out that blockchain technology and digital currencies promise to disrupt the financial system and radically change the way people view the financial world. Blockchain can digitize almost all documents, such as claims and contracts, and revolutionize the financial community.
Blockchain’s ultimate goal is to define cash by a single digital code based on its technology, Lundreedn said.
Although he is not openly endorsing cryptocurrencies, his views do not mirror those of Nobel laureate and Yale professor Robert Shiller, who compared the Bitcoin mania to the tulip craze in the 17th century and even predicted that the digital coin would eventually beforgotten.
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