Bernstein says crypto markets are not a bubble

July 09, 2018
Chris Wheal

In a report published on Friday, analysts at Bernstein suggested that the rise in cryptocurrency trading volumes was different to the dot-com bubble and that the platforms that offer continual trading act as a ‘natural correction system’.

Bernstein analysts wary of crypto comparison with dot-com bubble: Shutterstock

The report by the New York-based brokerage and financial research institution, added that the blockchain industry that supports cryptocurrency transactions is building parallel financial networks that, given time and scale, will challenge mainstream systems.

Crypto to become mainstream

Bernstein analysts said that while these new platforms currently operate on the “fringes of the mainstream economy … we will witness mainstream talent and then eventually capital diverted towards these new networks”.

But it was nature of continual trading – 24 hours a day, seven days a week – that appeared to impress the analysts most.

Natural correction system

A market than never closes for business serves as a “natural correction system for the bad actors”, the analysts said, unlike the dot-com bubble where the market reaction to news of weak business models came with a lag in trading hours that allowed huge pressures to build up.

“Crypto markets build and destroy fortunes every day,” the report said.

Innovation experiment

While it recognised that the cryptocurrency market was not without its problems, such as regulatory uncertainty, scamming and other fraudulent behaviour, such scepticism “fails to recognise it as a market-based innovation experiment to build out a new financial system”.

“Bitcoin needs no more critiques,” it said, adding that it was the first global digital, non-state-controlled financial asset that facilitates global money transfer and settlement at speeds and costs that no bank or other global network can offer.

The authors of the report concluded: “While, fraught with regulatory uncertainties around retail sale of security and fraudulent projects, the fund-raising movement has funded many projects that are building the core infrastructure layer of the crypto fintech network.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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