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A senior figure within the Barclays Smart Investor team had advised traders and investors to exercise extreme caution when it comes to investing in crypto currencies.

While the spectacular rise in the Bitcoin price attracted the attention of many investors towards the end of last year, economist and stock market analysts still regard crypto currencies as an area of extreme risk.

“The frenzy surrounding crypto has ebbed and flowed with the prices,” says Will Hobbs, head of investment strategy with Barclays Smart Investor. “Through the several hundred per cent of ascent in 2017, to the c. 70% decline since Bitcoin’s 2017 peak there has been no commensurate (or even perceptible) change in the fundamental prospects in the crypto currency. The same applies for most of its peer group.”

Hobbs says that without a role to play in the global economy, the intrinsic value of many of these crypto currencies still sits a long way below their current trading levels. He believes that the role they play is elusive in most cases while the arguments behind the idea of a future ‘Bitcoin standard’ are still economically illiterate.

“None of the crypto currencies currently fulfil any of the criteria that we would look for in an investible asset and we would continue to advise extreme caution,” he added. “The rout in crypto currencies is still not finished.”

At the time of writing, the Bitcoin price was £5,035. There has been some recent excitement after Bitcoin crossed the important 6000 barrier for the Bitcoin price vs the USD. Bitcoin remains the flag bearer for the entire crypto currency industry, and adherents are determined to talk it up as much as possible. Much hope is being attached to regulatory blessing for Bitcoin: Arthur Hayes, co-founder of BitMEX, has been telling the media in the US that Bitcoin is only one regulatory decision away from powering off to the dizzy heights of $20,000, or even $50,000 by the end of the year.

Generally speaking, we are seeing the Bitcoin investing community falling into three camps: those who hold Bitcoin, who obviously want to see it go up in price, are inventing reasons why it would do so. Those who own businesses which in some way rely on Bitcoin for their profitability, or have products that allow traders to buy and sell Bitcoin or Bitcoin derivatives, also have a vested interest in tooting the horn for Bitcoin.

However, talk to serious investors or asset allocators, including those in the institutional arena, and they won’t touch Bitcoin. According to one Israeli technology investor, with whom The Armchair Trader had lunch recently, “I will look at anything in the technology space at the moment, so long as it doesn’t involve crypto currencies.”

There is plenty of noise still being made about crypto currencies, and there is a business case for them, but not a strong enough one to support a population of more than 1500 different crypto currencies, and, we fear, not enough of one to support a rise of the Bitcoin price to $50,000. Bitcoin is not going to be the USD of crypto currencies – there is a reason, many reasons, why so many central banks hold US dollars; we’re still waiting to hear why they should be buying Bitcoin.

For more on investing in crypto currencies, check out our free guide. Unlike many of crypto currency’s proponents out there, we don’t have an interest in seeing Bitcoin go to $50,000.

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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