With the price of bitcoin moving toward $12,000, a top economist on Tuesday sent a stark warning to investors: The cryptocurrency is in a "dangerous speculative bubble."
"This is a toxic concept for investors," said Stephen Roach, Yale University senior fellow and the former Asia chairman and chief economist at investment bank Morgan Stanley.
Roach, described by Yale as one of Wall Street's most influential economists, spent the bulk of his 30-year career at Morgan Stanley heading up a highly regarded team of economists around the world.
He had a critical take on the explosion of buying the world's most popular cryptocurrency.
"This is a dangerous speculative bubble by any shadow or stretch of the imagination," he told CNBC's "The Rundown."
"I've never seen a chart of a security where the price really has a vertical pattern to it. And bitcoin is the most vertical of any pattern I've ever seen in my career," he added.
Bitcoin has surged more than 1,000 percent this year, accelerated by rising interest from retail and institutional investors who view the digital currency as a possible future means of exchange and store of value.
Major exchanges like the CME and CBOE have also legitimized the currency's investment credentials by saying they plan to introduce futures contracts to their respective exchanges, likely further supporting the price.
Roach suggested that exchange legitimization makes bitcoin "somewhat dangerous" for investors, given what he described as a "lack of intrinsic underlying economic value to the concept."
Many investors admit to not understanding the technicalities of the instrument or the blockchain technology that underpins its existence, hoping instead to profit on the expectation that bitcoin as an investment will simply continue to rise.
"Like all bubbles, they burst," Roach said.
"They go down, and the one who's made the last investment gets hurt the most, there's no question about it."
Bloomberg Pro Terminal
Trader: Velizar Mitov
Read more:
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.