Guggenheim Partners Chief Investment Officer Scott Minerd says the action in cryptocurrencies reminds him of Tulipmania, one of the most famous financial bubbles and crashes of all-time.
Tulipmania, the world’s first recorded financial bubble, occurred in Holland from late 1636 to early 1637 when tulip prices experienced a 12-fold increase before crashing back to normal levels.
"Crypto has proven to be Tulipmania," Minerd tweeted on Wednesday evening. "As prices rise, tulip bulbs and #crypto currencies multiply until supply swamps demand at previous market clearing prices."
The comments mark a sharp reversal from his prediction in February that bitcoin could reach as much as $600,000 per coin. He reached that number by comparing bitcoin to gold’s supply and its total value.
Minerd’s Guggenheim Partners, which has $270 billion in assets under management, in November filed for the right for its $5.3 billion Macro Opportunities Fund to hold up to 10% of its net asset value in Grayscale Bitcoin Trust, a digital currency investment product.
The total market capitalization for cryptocurrencies reached more than $2.5 trillion earlier this month, a more than 16-fold increase from the March 2020 pandemic low of $148 billion, according to CoinMarketCap.com.
But bitcoin and other cryptocurrencies have seen their prices fall sharply from record levels.
Bitcoin, the largest cryptocurrency by market cap at $779 billion, on Wednesday fell by as much as 28% to $30,681 per coin, hitting its lowest level in nearly four months. Other cryptocurrencies, including ethereum and dogecoin, saw even sharper declines before paring their losses.
The losses on Wednesday came China’s banking association warned member banks about the risks associated with digital currencies and told them not to transact in the digital tokens. The People’s Bank of China is expected to at some point launch its own cryptocurrency, the digital yuan.
Cryptocurrencies had been under pressure even before the Chinese government’s warning. Electric-car maker Tesla last week said it would no longer accept bitcoin as payment for its vehicles after saying in March it would accept the digital currency.
"This is not the death of #crypto just as the collapse of Tulipmania was not the end of tulip bulbs!" Minerd said.