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Majority of institutional investors call surging Bitcoin an unsustainable bubble

Tom Rees
UK investors were more sceptical about Bitcoin than the rest of the world - © 2015 Bloomberg Finance LP

The overwhelming majority of British institutional investors believe that surging cryptocurrency Bitcoin is a bubble ready to pop on the markets, an investor survey has found.

Just days before Bitcoin futures contracts are launched on the Chicago Board Options Exchange (Cboe), some 82pc of UK institutional investors polled by Natixis Investment Managers said that Bitcoin is an unsustainable bubble with asset bubbles ranked as the second-biggest concern for investors.

Investors in the UK were far more sceptical about its recent price surge with only 63.6pc of investors globally describing the digital currency saying that its rally is unsustainable.

The launch of Bitcoin futures contracts on Sunday on the Cboe and a week later on the Chicago Mercantile Exchange (CME) has been touted as the digital currency’s breakthrough into the financial mainstream.

Since the CME first announced the move on October 31, Bitcoin has surged over 150pc, sending its value soaring from around $6,400 per Bitcoin to over $16,000.

Analysts have pinned the recent rise of Bitcoin, in part, on the expectation of a surge of institutional investors soon entering the fray but the survey indicates that they remain sceptical.

Swissquote Bank analyst Yann Quelenn predicted that Bitcoin could hit $20,000 by Christmas and that its launch on the Cboe and CME could signal “an impending stampede of institutional investors”.

Analysts have compared its meteoric rise to the dot-com bubble in the early 2000s when tech stocks riding on a wave optimism over the emergence of the internet crashed.

It has also had a rocky relationship with the top brass of financial institutions. American tycoon Warren Buffett labelled the rise as a “real bubble” while JP Morgan boss Jamie Dimon described the digital currency as a “fraud”, adding that he would fire anyone at the firm who traded Bitcoin.

Hedge funds are reportedly poised to short the digital currency when futures trading starts on the Cboe and CME but Old Mutual‘s Gold and Silver Fund has been an outlier among the financial elite to set aside money for cryptocurrencies.

The Natixis survey also revealed that geopolitical events top investors’ list of concerns ahead of asset bubbles with the unwinding of quantitative easing the third biggest worry in the UK.

In addition, some 77pc of respondents in the survey agreed that they were concerned that a prolonged period of low interest rates has created asset bubbles.