I had the opportunity to listen to the audio and thought that a it would have been a value to share th actual content of the call, in addition to the slides.
First of all, here the link for the slides.
US Economic Outlook & Implications of Current Policies for Inflation, Gold and Bitcoin (15th in our COVID-19 Series)Here instead a transcript of what has been said during the conference, only in the part relative to bitcoin.
Please notice that this took less than 5 minutes at the very end of the call (literally: the call lasted exactly 60 minutes and they started talking about bitcoin in minute 55).
What about bitcoin, initially bitcoin had been proposed as a currency and, on page 29, we show what are the requirements for a currency: it has to be a reasonable medium of exchange, it has to be a reasonable unit of account; it has to be a reasonable store of value. Bitcoin does not offer any of that, none of the cryptocurrencies do. And so people have moved from bitcoin being suggested as a digital currency to being an asset class. We don't believe that cryptocurrencies, including bitcoin, are appropriate as an asset class. Let’s look at page 30 to see why that the case.
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First, it doesn’t generate any cash-flow like bonds, or the cash-flows from equities that are generated from their business, it is not generate any earning through exposure to Global economic growth, it doesn’t provide consistent diversification given very unstable correlations, it is doesn't dampen volatility given his historical volatility of 76%, compared equities to in the mid to high teens. On March 12 2020 the price of Bitcoin fell 37% in one day, and so we just want clients to actually see the kind of volatility we are talking about and there's no evidence, one way or another, whether it is inflation hedges because we haven't had much inflation since bitcoin was introduced.
So, the thought that one wants to own something because somebody else will pay for it by buying it at a higher price, always relying on somebody else who want to pay for it is not a suitable investment, in our view, for our clients.
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People have also quoted a lot of hedge funds saying they are going to be trading cryptocurrencies, and while something this volatile might be very appropriate for hedge funds and who wants to trade it because of the high volatility, that allure in our view does not s not constitute a viable investment rationale.
We also want to make sure clients know that cryptocurrencies including bitcoin are not scarce commodities. There are many cryptocurrencies out there and even bitcoin has forked and we have not just regular bitcoin, but now we have bitcoin cash and bitcoin SV.
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On page 32 we highlighted how these cryptocurrency has been used for very illicit activities from Ponzi schemes to money laundering, to Dark Net where people buy illicit goods to actually ransomware, and it's important just to recognise that least what we've highlighted in red is from 2019, so this not old information, this is current information where people use cryptocurrencies to actually have ransomware attacks on let's say emergency responders and healthcare providers. Obviously, we intentionally highlighted those two, given the current state of the pandemic.
It is also important to recognise that there's a lot of hacking and inadvertent losses with digital wallets, all kind of issues, and we've highlighted them on page 33..
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Page 34 is probably one of the most interesting pages. We published this in early 2018, in our 2018 Outlook. What we see in exhibit one is NASDAQ, S&P 500 and TOPIX, TOPIX has different points of equity market bubbles, so 2000 example for the S&P and NASDAQ. We then move on to the middle one and we show the bitcoin in the context of the equity market bubbles as well as the prices for tulip bulbs in 1634 thru 1637, which was considered an extreme mania. So, tulip mania was the poster child for mania and then we show you where Bitcoin prices has gone, so clearly unreasonable pricing. And then we show you on the 3rd exhibit where Ehter was relative to bitcoin, and Bitcoin ended being like a flatline.
So the pricing here in our view is quite arbitrary and random and volatile.