Bitcoin has risen to about $37,000 per unit at the time of writing. While this number is nothing compared with the new all-time high it attained in mid-April, it is still about $5,000 more than where it stood during the early portion of the week. Thus, it can be said that bitcoin may be returning to its bullish roots. However, according to New York University finance professor Aswath Damodaran, investors should not get too comfortable with the sudden rise of the world’s number one digital currency by market cap.

Aswath Damodaran Doesn’t Think Much of BTC

Damodaran is not a bitcoin fan and says that it will never amount to anything either as a currency or as a store of value. While he acknowledges that bitcoin was doing quite well up until about a month ago, the asset’s strong performance has simply placed everyone in the same mind frame of assuming that the market is always going to remain strong from here on out. However, he warns investors that they should never allow their confidence to cloud their judgement.

In a recent interview, Damodaran says:

We have been in a market that has been so good for so long that people have become sloppy and lazy – whether it is in the form of SPACs or buying deep out-of-the-money call options. They think making money is easy and markets have a way of fixing that thinking very quickly. Be cautious, because the exact forces that lead you to speculate might be the forces that hold the seeds for your downfall… This market is being driven by mood and momentum, and even revenge. Think of what drove those Redditor investors to drive GameStop up. It is not because they thought GameStop was worth more. They wanted to take revenge on hedge funds. Mood and momentum are being reflected in things like SPACs, or what happened to NFTs, or what is happening to bitcoin.

It Will Never Be a Currency

Continuing his discussion of bitcoin, the professor stated that bitcoin was never really “designed to work” as a payment option, and says it is too vulnerable to price swings to ever be effective in that area. He comments:

As a currency, bitcoin has not worked, and it was never designed to work. When did you use it to buy a house, your lunch, your coffee? The answer is almost never because it is an incredibly inefficient currency… Between February 14 and March 20 last year, we were in full-scale panic and stocks lost 35 percent of value, but gold held its value. You know what bitcoin did in those six weeks? It was down 50 percent. When stocks came back, bitcoin came back even more strongly. In 2020, bitcoin behaved like a very risky stock – not like gold, not like a collectible.

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