Waverton performs volte-face on Bitcoin

The manager has reversed its stance on the asset it once termed a 'speculative bubble'

The manager has reversed its stance on the asset it once termed a ‘speculative bubble’

Waverton Investment Management has reversed its stance on Bitcoin, saying it now believes in the digital currency.

The comments come from Waverton fund manager William Hanbury who argues the development of the cryptocurrency market in recent years has legitimised and strengthened Bitcoin.

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Hanbury points to a strengthening regulatory environment as part of this, with several regulators introducing frameworks around Bitcoin trading.

This has allowed more institutional investors to feel confident enough to trade in Bitcoin such as Fidelity. Hanbury says this has created a “positive feedback loop” which results in price rises and a stronger brand for Bitcoin.

“There will likely remain a significant portion of people who question Bitcoin’s ability to gain widespread support,” said Hanbury, who points to criticisms of Bitcoin’s intangibility, complexity and lack of government oversight.

“While we have some sympathy with these concerns, we are firmly of the view they will quieten with time. The Bitcoin brand is likely to strengthen driven by increased regulation, further institutional sponsorship and more, potentially significant, price increases.”

Waverton was recently one of the critics and in 2017 discounted Bitcoin as a “speculative bubble”.

This thinking has now reversed and Hanbury even draws comparisons with gold as Bitcoin becomes increasingly regarded as a safe asset.

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“While gold has returned 4.5% a year on average over the last century, its price has been characterised by a series of boom and bust cycles,” said Hanbury. “The feedback loop would take hold on the way up, and then on the way down a reverse cycle of lower prices, decreased demand and weakening brand would exacerbate the fall. 

“We expect Bitcoin to follow a similar path. However, there is one important distinction between Bitcoin and gold which is that the volume of gold supply will increase when the price increases, whereas for Bitcoin the supply is reduced every four years, regardless.”

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