A Deutsche Bank economist has said that a bitcoin price crash will be one factor that will impact global markets next year.
Torsten Slok, Deutsche’s Bank’s Chief International Economist, has identified 30 risks that investors should look out for next year that are likely to hit global markets. These include Brexit, a U.S. equity correction, and the Irish presidential elections. Interestingly, a bitcoin crash is listed as the 13th-highest risk, reports Bloomberg.
In the note, Slok wrote that the risks should be thought of:
…not only as potential VIX-boosters but also as potential sources of faster or slower growth than what we have in our baseline forecast.
Other factors on the list include the U.S. midterm elections in November, German inflation, a new U.K. government, and a housing bubble bursting in Canada, Australia, Sweden, Norway, or China.
Slok asked:
Are markets ready for even a small correction?
While noting that there hasn’t been one for ‘a long time.’
It’s interesting to see that Slok has listed a bitcoin crash as a likely factor that will impact global markets in 2018. When you look at bitcoin’s market cap it currently amounts to just over $277 billion. The combined market value is worth $441.8 billion. Yet, when you compare it to the U.S. housing market, in 2016, that was valued at $29.6 trillion.
When you look at it it doesn’t seem possible that the combined digital currency market will have much of an impact on global markets. That, however, hasn’t stopped many from speculating that bitcoin is currently in a bubble that will burst. So much so, that Stephen Roach, a Yale University senior fellow and the former Asia chairman and chief economist at Morgan Stanley, recently argued that the digital currency was in a ‘dangerous speculative bubble.’
He added that trading in bitcoin was ‘somewhat dangerous’ for investors and that ‘like all bubbles, they burst.’
While this is the opinion of many bitcoin naysayers, Mike Novogratz, billionaire hedge fund manager and bitcoin bull, claims that it’s not necessarily a bad thing that the cryptocurrency is in a bubble. In an interview the former Fortress manager said:
Historically, manias or bubbles happen around things that fundamentally change the way we live. If it’s the railroad bubble or the Internet bubble, it really changed the way we live.
Featured image from Shutterstock.