UK Edition
The Queen’s bankers dismiss bitcoin as pure speculation as it smashes through $14,000
Bitcoin has smashed through $14,000 (£10,460) on some exchanges, less than 24 hours after surpassing $12,000, as the boom in the cryptocurrency’s price shows no sign of ending.
Sceptics who call the market a bubble were joined by a weighty authority, however . Coutts, the Queen’s bank, has declared it to be purely speculative and refuses to invest.
“Its sharp rise brought back memories of the dotcom bubble back at the turn of the century,” said Lilian Chovin, an investment strategist at the bank.
Bitcoin has risen in price from around $760 a year ago and $360 two years ago.
Ms Chovin said the digital currency’s rise is not based on any underlying fundamentals which would make it a suitable investment.
“Our view at Coutts is that, as an investment asset, electronic currencies like Bitcoin have nothing but sentiment backing them up,” she said.
The bank acknowledges the returns “were always going to attract attention”while “novelty value” has helped to boost the market, but that the soaring demand driving the price upwards remains “pure speculation”.
They are also “are vulnerable to government sanctions and lack the kind of data we look for to gauge value. We therefore have no current plans to include them in our investment strategy,” Ms Chovin said.
Coutts fears that the wider technology sector altogether could be experiencing a bubble-like rise.
“Technology has been a significant outperformer this year in the US. It has risen by around 35pc in US dollar terms which is almost double the return from US equities,” Ms Chovin said.
However, she added that some parts of the sector appear to have real promise, including artificial intelligence and driverless cars, and even that the technology behind bitcoin could prove useful in future as businesses put it to work.
“In our view the development of blockchain technology, which sits behind so-called ‘cryptocurrencies’ like Bitcoin, is a far more interesting area to watch,” she said.
“This new technology has the potential to disrupt any field where there’s the need for secure, transferable records.”
If the Queen had spent all of last year’s sovereign grant of £42.8m on bitcoin in April 2016 the crown would have multiplied its annual income to £1.3bn by now.
Earlier this week a JP Morgan analyst said cryptocurrencies could in time become a more reliable asset akin to gold - though that contradicts the bank's chief executive and chairman Jamie Dimon, a very vocal critic of bitcoin.
Meanwhile money transfer app Revolut said it will let customers invest in bitcoin and other cryptocurrencies.