Bitcoin: 'It's not gold, it's not a currency – it's a tech stock'

Richard Evans 21 May 2019 • 11:58am

Bitcoin is not a currency and it’s not “digital gold” – it’s more akin to a fast-growing tech stock. This is the view of an experienced investor who used to run multi-asset funds for HSBC.

The cryptocurrency, whose value has soared and crashed repeatedly in recent years, does not derive its value from its scarcity – there is a limit on the number of coins that can ever be created – but from the number of people who use it, according to Charlie Morris, who founded ByteTree.com, a crypto data provider, in 2015 after a 17-year career at HSBC.

“Bitcoin is a network and its valuation is directly related to the size of that network,” he said. “The more people who use it, the more valuable it becomes.”

Mr Morris said these dynamics made Bitcoin more like a technology stock. He pointed to a striking correlation between the price of the cryptocurrency and the share prices of technology companies, as measured by the Solactive Social Media index.

“Bitcoin is an ultra high-growth asset that behaves just like internet stocks, just with extra vigour,” Mr Morris added. “Its price will appreciate as its usage increases, and it will follow a similar path to internet stocks in general.”

He said $12bn (£9.4bn) in Bitcoin had changed hands across 2.7 million transactions in one week earlier this month. “It is on track to see $600bn transacted this year, a number that will soon pass a trillion,” Mr Morris added.

“To put that into perspective, $18bn of Bitcoin changed hands in 2013, when there was a widely reported bubble, and $576bn in 2017, when there was said to be another bubble.”

While using Bitcoin for everyday purchases hasn’t caught on, it is increasingly being used for large money transfers or payments that require multiple signatories.

Some investors regard Bitcoin as “digital gold” because the limit on the creation of new units is analogous to the finite supply of the precious metal. But Mr Morris said: “People who think Bitcoin is the new gold couldn’t be more wrong.

“It was indeed designed around the idea of gold, in that it has limited supply, but that’s as far as it goes. By my calculations, the surge in Bitcoin is mainly attributable to network growth – demand – with perhaps less than 5pc due to supply factors.”

The price of Bitcoin peaked at $18,674 in late 2017 before falling dramatically to $3,157 in December last year. But in recent weeks it has staged another recovery to around $7,800.

“Bitcoin is bold, speculative and volatile,” Mr Morris said. “But it is also real. Gold will keep you rich, but Bitcoin could make you rich.”