Chris Iggo: bitcoin is no currency

published 15 December 2017

"Anyone following the price movements of bitcoin can't have been anything other than amazed at its recent performance," says Chris Iggo, chief investment officer of Axa Investment Management. However, it's hard to see the digital asset as a currency, he reckons. Money should act as "a store of value and a means of exchange" and it's "hard to see that bitcoin satisfies those criteria".

Indeed, "it is fair to conclude that with a market capitalisation bigger than some household-name corporations, we are witnessing a digital bubble". While "robots may be coming to take our jobs", Iggo thinks that "bitcoin might take people's wealth first".

Still, if bitcoin is indeed a bubble, it may not be the only one. "The Dow Jones jumped 4.8% in the last three days of trading in November, rising above 24,000 (with a celebratory tweet from the president) and marking a price gain of 23% so far in 2017." This is "one heck of a bull". If you also consider the "extremely low levels of volatility", it's clear "stock investors have rarely had it so good". Perhaps "President Tweet can keep the market going up" but "a bout of profit taking would not be a big surprise".

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Yet despite excessive valuations, the economy remains "strong, strong, strong". Purchasing managers' index (PMI) surveys of activity from around the world for November showed that manufacturing business is solid pretty much everywhere, "buoyed by reasonable final demand and a strong technology cycle". So those who are tempted to bet against the market should note that "there is a good relationship normally between global PMIs, the economic cycle, corporate earnings expectations and stock prices" so "markets might not turn until the economy does".

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