On Tuesday (February 9), Ruchir Sharma, Head of Emerging Markets and Global Macro at Morgan Stanley Investment Management, wrote a report in which he explained why “cryptocurrencies are here to stay as a serious asset class.”
Sharma started his report by saying that although the current price of Bitcoin might suggest to some investors that “this is a bubble”, to others, including Morgan Stanley, this is a “sign that Bitcoin is following the natural path of new inventions, in which investor interest comes first from venture capital, then from hedge funds, and finally — about 10 years on — from traditional Wall Street players.”
Sharma then went on to say that regardless of what happens to the price of Bitcoin there are “fundamental reasons” behind their belief that “cryptocurrencies are here to stay as a serious asset class”.
The first is “growing distrust in fiat currencies, thanks to massive money printing by central banks”. The second is that is that younger people generally see cryptocurrencies as an exciting advance over traditional fiat currencies which come in the form of coins and notes. The third is that “unflinching demand from millennials has helped lower the volatility of Bitcoin, even during the pandemic”. And he says that in emerging markets, the level of distrust of central authority is even greater than that of millennials.
Although he acknowledges that Bitcoin is not going to “topple the dollar any time soon”, he points out that “traditionalists continue to dismiss the seriousness of the crypto challenge at their own risk”.
Sharma concludes his report by saying:
“So even if Bitcoin’s price pops, as it has before, the rush of 2020 can’t be dismissed as an irrational mania. Cryptocurrencies are still young, they still face growing pains. But they also promise speed, transparency, and low fees that traditional payment channels cannot match. They satisfy a growing demand for a digital alternative to gold, an asset likely to protect investors from massive money printing and the threat of inflation.
“To younger investors, ‘crypto’ already evokes digital, stable and good, not shadowy and sinister. The rest would be well advised to recognize that the currency world is changing, or risk being left behind.“
Last September, CNN anchor Julia Chatterley Watch did an interview with Sharma, where he said that he believes that once we have a reliable COVID-19 vaccine, inflation could return much sooner than some people expect, and perhaps as early as 2021.
Sharma was also asked what he thinks about gold and cryptocurrencies, and this was his reply:
“It’s a generational thing. I think some of the older [investors] are still buying gold, and millennials are buying more of the Bitcoins and the cryptocurrencies…
“There is this lingering feeling out there that given what central banks are doing in terms of printing so much money, there is a search for alternative assets.“
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.