Bitcoin Surges Despite Being Called a 'Particularly Vile Asset Class'

Is Bitcoin a "particularly vile asset class" indicative of an "extreme form of libertarian anarchism" or is it a precursor to an increasingly decentralized world powered by digital technology and a good inflation hedge against government-issued fiat currencies?

The fault lines are becoming increasingly stark as the cryptocurrency's price continues to climb and critics express serious doubts.

Tim Bond, partner and portfolio manager at Odey Asset Management in London, recently grabbed headlines by saying Bitcoin has no real purpose except as a speculative tool and, in some cases, as a way to launder money for illegal activity.

"If Bitcoin starts to displace fiat currencies, governments' ability to tax, spend and redistribute will be severely impaired," he told MarketWatch. "In this sense, Bitcoin is the spearhead of a particularly extreme form of libertarian anarchism, which is presumably why it is so popular in Silicon Valley. To my mind, Bitcoin is a particularly vile asset class."

Bitcoin true believers flooded message boards with comments critical of Bond's view, saying his arguments had been "debunked" and urging him "to do some research."

But the critics never said how his concerns had been debunked and didn't offer a point-by-point refutation of his argument. That suggests Bitcoin has become an emotional issue for some—almost an article of faith—and that may contribute to its wild price swings.

Nebraska: Warren Buffett
Warren Buffett, CEO, Berkshire Hathaway, has called Bitcoin "rat poison squared." Fortune Live Media / Flickr

Despite Bitcoin's volatility, major Wall Street firms—Morgan Stanley is the latest— now offer services to allow investors to place their bets on Bitcoin.

But value investor Warren Buffet has called Bitcoin "rat poison squared," and continues to make big bucks by betting on established companies such as Merck, Bristol-Myers Squibb, T-Mobile, Verizon and Chevron.

Buffet looks for undervalued companies that provide a vital service or product in the here-and-now economy. The estimated net worth of his company, Berkshire Hathaway, is $530 billion.

Bond may be right about Bitcoin's use for illegal activities, but Citi Bank said illicit use of cryptocurrency is falling.

While a recent hearing held by the House Financial Services Committee's Subcommittee on National Security didn't focus exclusively on Bitcoin, law enforcement officials said investigators lack full legal authority to track terrorists using cryptocurrencies.

The IRS is keeping an eye on Bitcoin investments for tax purposes, reminding everyone that the Tax Man cometh.

Federal Reserve Board Chairman Jerome Powell
Federal Reserve Board Chairman Jerome Powell testifies during a Senate Banking Committee hearing on Capitol Hill on September 24, 2020 in Washington, DC. Drew Angerer/Getty Images

Thursday's decision by the Federal Reserve, the nation's central bank, to keep interest rates low is likely to boost the economy as it emerges from the COVID-19 lockdown. Cyclical stocks, or those that reflect and ups and downs of the economy, are likely to benefit. The Fed doesn't see inflation as an immediate threat.

But some fear a quickly rebounding economy and increased government spending, including the $1.9 trillion COVID-19 aid package recently signed into law by President Joe Biden, will lead to inflation.

That, Bitcoin backers say, is the foundational argument for the cryptocurrency because it's not controlled by any government.

Jason Deane, analyst at Quantum Economics in London, offered a sanguine view of Bitcoin.

"Bitcoin is backed by the certainty of maths and, every day that goes past, the security of the network grows in a known, linear fashion," he told Newsweek.

Jason Deane
Jason Deane, Bitcoin Analyst, Quantum Economics, London (Photo Provided) Photo Provided

"In other words, as long as the rules of mathematics agree that 2 plus 2 equals 4, Bitcoin will always function perfectly and independently of human control," Deane said. "This, many argue, creates certainty of value in a way that cannot be reproduced with any other asset."

There is no simple way to reconcile, let alone resolve, arguments about Bitcoin and its value or role in the economy. What's clear is that the world has never seen anything like the cryptocurrency.

In mid-day trading Friday, Bitcoin fetched $58,824.36 and is up 102.65% for the year. The record high is $61,556.59, CoinDesk reported.

Market Pulse

Air travel is picking up as more people get vaccinated against COVID-19 and some state governments relax quarantine restrictions.

That's good news for airline and travel-related stocks.

The number of passengers boarding U.S. carriers fell about 60% in 2020 from 2019 and cut air travel to levels last seen in the mid-1980s, the Bureau of Transportation Statistics reported.

On Thursday, the Transportation Security Administration screened 1,407,233 passengers at U.S. airports, compared with 779,631 on the same day a year ago— an 80.5% increase.

American Airlines Plane above Los Angeles Airport
American Airlines Boeing 787-9 takes off from Los Angeles international Airport on January 13, 2021 in Los Angeles, California. AaronP/Getty

American Airlines said it's testing touchless travel options at Dallas Fort Worth International Airport and Ronald Reagan Washington National Airport. Those enrolling in the trial program will be able to use biometric technology to drop off their suitcases without searching for a driver's license or a boarding pass.

There's also more reason for tourists to travel.

Many states are relaxing restrictions on indoor dining and permitting movie theaters to reopen. California has outlined steps for Disneyland and other tourist attractions to reopen at lower capacity if specific benchmarks are met.

In New York, professional sports venues have reopened at 10% capacity. Connecticut, New York and other states are relaxing quarantine requirements for inbound travelers.

The upward trend is likely to continue. President Joe Biden said a coronavirus vaccine will be available for all American adults who want it by the end of May.

The catch: Proof of vaccination could become a de facto internal travel document if airlines and public venues demand it as a condition of admission.