The recent crash in the broader crypto market, which saw Bitcoin (BTC) plummet to as low as $102,000 on Friday, has ignited renewed criticism, leading to a cautionary statement from Hargreaves Lansdown (HL), the largest retail investment platform in the UK, which manages approximately $225 billion in assets.
Bitcoin As Non-Asset Class?
The firm issued a stark warning to its clients, advising them to steer clear of Bitcoin. HL emphasized that the cryptocurrency holds “no intrinsic value” and should not be included in their life savings or retirement strategies.
In a statement, HL acknowledged that while Bitcoin has delivered positive long-term returns, it has also undergone extreme volatility, making it a riskier investment compared to traditional assets like stocks and bonds.
The firm asserted that Bitcoin does not qualify as an asset class and lacks the characteristics necessary for inclusion in growth or income portfolios. Furthermore, HL noted that performance assumptions for cryptocurrency are challenging to analyze, reinforcing the view that it lacks intrinsic value.
Hargreaves Lansdown is the third major financial institution to issue such a warning recently, joining Deutsche Bank and Elliott Management in expressing skepticism about the value proposition of cryptocurrencies.
Just days prior, Deutsche Bank informed its clients that Bitcoin is “backed by nothing,” although it anticipates that the cryptocurrency may eventually be adopted as a reserve asset by central banks.
In January, activist investor Elliott Management cautioned its clients about an “inevitable collapse” of Bitcoin, citing its lack of substance as an asset.
Crypto Market Rebounds
While Hargreaves Lansdown’s assessment of Bitcoin’s volatility and risk is valid, it is important to note that Bitcoin has also proven to be a profitable investment.
Following the recent collapse in prices, Bitcoin has shown signs of recovery, priced at around $114,200, reflecting a 83% increase year-to-date (YTD), significantly outpacing the S&P 500.
Ethereum (ETH), the second-largest cryptocurrency by market capitalization, also climbed on Monday nearly 9% to hover around $4,130. After dipping below the $4 trillion threshold on Friday, the total market capitalization rebounded to reach approximately $3.9 trillion.
The price fluctuations followed a disastrous Friday that saw over $19 billion evaporate from traders’ positions, marking the largest one-day liquidation event.
Within a span of 24 hours, Bitcoin lost more than $200 billion in market capitalization and dropped nearly 10% in value, while Ethereum suffered an even steeper decline of almost 14%.
The market turmoil even extended to stablecoins. USDe, one of the largest stablecoins by market capitalization, briefly depegged to 65 cents on Binance before swiftly recovering back to its $1 value.
Featured image from DALL-E, chart from TradingView.com
