BlackRock Strategy: Cryptocurrency Speculation Doesn’t Present Systematic Risk

BlackRock Global Chief Investment Strategist Richard Turnill argued Tuesday (July 11) that loose monetary policy has resulted in a huge run up in cryptocurrency, such as bitcoin, but it doesn’t pose a risk to the financial system.

According to a report in Reuters, Turnill said bitcoin price movements could be influenced by easy monetary policies that were instituted by central banks following on the heels of the global financial crisis that started in 2007 and lasted until 2009. The gains in cryptocurrencies could also be a sign the market could be in a bubble.

“I look at the charts, and to me that looks pretty scary,” Turnill said at a media briefing in New York covered by the newswire. He and his BlackRock colleagues have been telling clients to remain invested in global stocks despite the risk and despite warnings from some strategists that prices are too high. As to the speculations, he’s not concerned about the broader implications from the wild movements in the digital currencies.

“There’s no evidence that if that price went to zero tomorrow that there’d be any broader financial implication over time, but to me it is [an] example of where you’re getting some big price movements in the market.”

BlackRock isn’t the only one to warn about a bubble in cryptocurrencies. Those same concerns have hurt Ethereum’s price this week. According to a news report, the digital currency has been having a tough go of it lately, falling more than 45 percent since hitting a record high of $400 in mid-June.

There is talk that the cryptocurrency market is reaching a bubble after Mark Cuban said bitcoin, the Ethereum competitor, was already in bubble mode. “I think it’s in a bubble. I just don’t know when or how much it corrects,” Cuban recently tweeted, noted the report. “When everyone is bragging about how easy they are making $=bubble.”

Following those speculations, came a statement from Jeffrey Kleintop, Charles Schwab’s chief global investment strategist, who, according to the report, also suggested bitcoin’s price was in a bubble and in one not seen before.