Bitcoin and other cryptocurrencies could face a “brutal” price correction when regulators eventually weigh in on the sector, Europe’s largest asset manager Amundi has said.
The firm’s deputy chief investment officer Vincent Mortier said cryptocurrencies cannot be viewed as money or an asset worth investing in, in comments published as part of an upcoming report on the sector, seen by Financial News.
It is the first time Amundi – with €1.7tn of assets under management – has taken a public stance on cryptocurrencies.
“To date, [crypto] is neither a proven store of value, nor a recognised unit of account and even less a universal means of payment,” Mortier said. “Cryptocurrencies have no real economic underlying asset. As a result, there is no valuation model.”
Speaking to FN in a virtual interview, Mortier said the price of bitcoin above $50,000 was difficult to justify.
The cryptocurrency reached an all-time high of above $61,000 earlier this month, and was trading around $56,800 as of 12:20 GMT on 24 March.
“In itself, the technology is not without merit… but the nature of it, and the development of it in a decentralised non-regulated manner will soon become impossible to tolerate by central banks,” he said.
Impending intervention by regulators such as the People’s Bank of China, the European Central Bank and the US Federal Reserve would not see bitcoin fall to zero value, but could lead to the digital asset falling from its recent highs, Mortier said.
But, he added, “given the possibilities, I wouldn’t be surprised if it goes quickly back $30,000 or $20,000 — what is a fair value is very difficult to say.”
Regulators are likely to be primarily concerned about stablecoins — a digital asset tethered to one or more fiat currencies — as they pose “an attack on the monopoly of states”, Mortier said.
“Total anonymity and legal immunity seem to have been central to the development of these assets, at least initially,” Amundi’s report said. “G7 regulators are therefore determined to regulate the cryptocurrency ecosystem.”
Mortier said Amundi does not currently offer its clients access to any cryptocurrencies or crypto-linked funds, and has no plans to do so in the near future. Its stance on the sector is in stark relation to US investment banks Citigroup, Goldman Sachs and BNY Mellon, all of which have launched significant activity in the crypto and blockchain space this year.
The concept of bitcoin as a form of “digital gold” for investors, as JPMorgan has advocated, is “at best, conjecture that needs to be verified and, at worst, an illusion”, Amundi’s report said.
Mortier said bitcoin had not yet proved itself to be a hedge against extreme risk and inflation during a period of financial crisis, as gold has over centuries.
“[Cryptocurrencies] soared during the Covid-19 economic crisis but haven’t been through an episode of financial stress,” he wrote in the report.
“Their correlation with other asset classes is unknown. Giving them the same status as gold, ex ante, when estimating their upside potential is questionable.”
Mortier also told FN he was surprised by the advent of institutional investors ploughing into cryptocurrency-linked products, when considered alongside the sector’s environmental and sustainability targets.
“More and more of our clients are wanting to be ESG-funded in a way, but when you look at bitcoin, it’s not very good because of its carbon footprint,” he said. “We cannot ignore these issues.”
To contact the author of this story with feedback or news, email Emily Nicolle