Richard Bernstein, head of Richard Bernstein Advisors LLC recently had a take on bitcoin and for him, bitcoins were just like coins obtained in a popular mobile game, Candy Crush. Bloomberg reported that the former chief investment strategist at Merrill Lynch said this in a note on Wednesday.
According to Bernstein, the only difference between cryptocurrency tokens and coins won when playing Candy Crush is that cryptocurrencies, which are gotten after solving complex mathematical problems are tradable while the game tokens were not.
He went on to say that because cryptocurrencies can be traded, they fit the perfect description of a bubble. Bloomberg quoted him as saying that “the coins have increased liquidity, increased use of leverage, the democratization of the market, increased turnover and increased new issues.”
He didn’t entirely condemn the systems built around bitcoins and other cryptocurrencies, however. Cryptocurrency related businesses may still be viable but the return on investment, Bernstein believes will “considerably lower than investors currently expect.”
Bernstein weighed in on the calls to regulate the cryptocurrency markets to protect investors and prevent fraudulent practices. He wrote that it was impractical given the number of cryptocurrencies (over 1300) which he assumed were “not of equal quality”.
Bernstein has had less-than-complimentary remarks for cryptos in the past. He once described bitcoin as a ‘censorship resistant’ asset which he said will not pose a threat to regular fiat currency. In October before bitcoin prices spiked to over $19,000, he predicted that the value of bitcoin will be driven by the faith of its citizens, referring to miners, developers, individual and states that adopt it.
Later in December, he released a note where he explained that bitcoin met his five criteria for a speculative bubble. The criteria included; plenty of liquidity to facilitate and encourage speculation; increasing use of leverage; “democratization” of the market as normal people join in; increasing “new issues” to satisfy the exploding demand for ways to play; trading volumes are increasing.
He finally predicted that the bitcoin bubble would bust when there’s “a reduction in liquidity” and/or when there’s “a sudden lack of new “greater fools” to dive into the market and drive prices higher.”