Criticism of bitcoin by the financial community seems to be unending, as Ray Dalio has said bitcoin markets are in a bubble. Dalio made the comments in an interview with CNBC.A bubble refers to a situation in financial markets, when there is a relatively high level of trading activity in an asset class at prices significantly higher than they should be.

While Dalio believes the coin can serve as a form of money, the speculation surrounding it and inability to conduct transactions, prevents that. Dalio is the founder of Bridgewater Associates one of the world’s largest hedge funds. His comments barely one week after another JP Morgan CEO Jamie Dimon knocked the currency calling it a fraud.

 

Dalio is partly right

Speculation surrounding the currency has increased due to the returns it has generated. Year to date, bitcoin has appreciated over 400%. the currency opened the year at $975 and is currently trading at almost $4000. Investors have flocked into the currency with the belief, that the price may go even higher. Real world applications have been slow to materialize.

Criticism could be for ulterior reasons

Another school of thought believes the criticism of bitcoin may be a ploy to crash the price in order to buy cheaply. Dimon’s comments are believed to have caused or coincided with a massive fall in the price of bitcoin and other cryptocurrencies last week.
Reactions to the currency by countries have been mixed. Chinese financial regulators first banned participation in Initial Coin Offerings (ICOs) then notified the country’s exchanges to stop operations by the end of October. Russia on the other hand has finalized arrangements for derivative instruments based on bitcoin to begin trading on the Russian Stock Exchange.

The Central Bank of Nigeria (CBN) has asked Nigerians to exercise caution with respect to bitcoin, but is currently drawing up a draft policy with respect to trading in the cryptocurrency. The apex bank had recently held fora with stakeholders to sample opinions and thoughts on the currency.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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