'Darker Days' Ahead for Crypto, They're 'Pretty Valueless', Veteran Analysts Say

  • Craig Erlam, an experienced market analyst at UK-based Oanda, believes crypto prices will drop lower.
  • Other analysts have argued that bitcoin is not "suitable" for investing.

Craig Erlam, a senior market analyst at London-based consultancy firm, Oanda has said that “darker days” may “still lie ahead” for the cryptocurrency market.

Erlam, a former consultant at Goldman Sachs, told MarketWatch (on January 31st): 

Bitcoin appears to have stabilized again following a couple of volatile months that saw it once again come under pressure.

However, Erlam cautioned that bitcoin (BTC), the flagship cryptocurrency, has again started “trading in much tighter ranges” while also continuing to “drift lower.” The downward price movements suggest that bitcoin and other cryptocurrencies could continue to lose value, Erlam said.

BTC Must Break $4,500 To Avoid "Near-Term Downside"

Should bitcoin “break above $4,500”, then it would indicate that “near-term downside risks have been abated”, Erlam noted. If BTC price continues to increase after reaching $4,500, then Erlam believes it will “bring $6,000 back into focus.” Currently however, the “momentum remains with the bears”, according to the former dividends administrator at Pershing Nominees.

Notably, Erlam is not the only analyst who has recently warned investors about the potential risks of acquiring cryptoassets at this time. Andreas Utermann, the CEO at Allianz Global Investors, a multinational asset management firm, published a column (on January 30th) in which he noted that blockchain-based cryptocurrency platforms lack important economic features.

Cryptocurrency Is "A Claim On Nobody"

The traditional fiat-based financial system allows for proper tax collection and it also provides a better way to earn interest payments, Utermann argued. Meanwhile, the former Merrill Lynch banker believes distributed ledger technology (DLT)-based currencies have neither the features, nor the characteristics, required to engage in productive trading.

In his column, Utterman also mentioned: 

As an asset, a cryptocurrency is a claim on nobody — in contrast to sovereign bonds, equities or paper money — and it does not generate an income stream. As a currency, it is only a medium of exchange for larger-ticket items, and is simply too volatile to be considered as a numeraire or a store-of-value [SoV].

Preference For "Physical" Assets

Because cryptocurrencies cannot function effectively as a store of value due to regulatory uncertainty and extreme volatility, Utterman believes digital assets are “unsuitable for investing.” He added:

I would expect policy makers to take a close interest in the emergence of initial coin offerings (ICOs) that are being marketed as investments and a home for individuals’ savings.

In an interview with Bloomberg (in December 2017), Utterman had said cryptocurrency was “pretty valueless” and that he preferred (physical) investments, or valuables, that you could actually hold in your hands such as the Mona Lisa painting.