Analysts say that the ubiquitous cryptocurrency bitcoin is now part of our investing lives, after backing from major companies like Tesla. However, new data suggests that the blockchain-based digital coin will be subject to major volatility — especially given that creating new coins comes at a high environmental cost.
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After Reaching $60K, Bitcoin Part of Investing World
Over the weekend of March 12, the value of a single bitcoin reached $60,000 for the first time, thanks in part to a major investment by Tesla and newly minted “Technoking” Elon Musk. According to Barron’s, the milestone gives bitcoin a $1 trillion valuation. As a result, Harvard University economist and Deutsche Bank analyst Marion Labouré is now calling it “too important to ignore.”
With these moves, major investment firms are now starting to pay much closer attention to bitcoin and other cryptocurrencies, and could ultimately allow their clients to place cash into the market. CNBC reports Morgan Stanely will start allowing their investors to access crypto-based funds, while Reuters notes Bank of New York Mellon will back cryptocurrency storage firm Fireblocks.
See: Morgan Stanley Will Offer Wealthy Clients Access to Bitcoin Funds
Find: Elon Musk Is Making a $150 Million Mistake with Bitcoin, According to This Economist
On the downside, Labouré notes that placing money in bitcoin and other electronic tokens comes with significantly more volatility than traditional securities. She credits this to the Tinkerbell Effect, where the price goes up based on how much people believe in it. Drawing the comparison to major investor Tesla, the economist says bitcoin “will have to transform potential into results to sustain its value proposition.”
Additionally, a combination of low liquidity and difficult comparisons makes it hard to project bitcoin’s future trajectory. Although 40 billion shares of Apple traded throughout 2020, only 28 million bitcoins exchanged hands during the same time — representing 150% of the coins in circulation.
Bank of America: Bitcoin Energy Consumption Similar to Airlines
The bitcoin outlook comes as Bank of America slammed the digital currency, claiming it can be easily manipulated by major coinholders. Financial News reports the research paper claims bitcoin is responsible for 60 million tons of carbon dioxide emissions in the world, giving it the same carbon footprint as the nation of Greece. Moreover, the concentrated ownership of coins makes it easy to shift pricing based on supply and demand.
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This article originally appeared on GOBankingRates.com: Bitcoin ‘Here To Stay,’ Despite Volatility and Climate Impact