NEW YORK (WSI) - "Bitcoin mania is a textbook bubble , which is probably going to explode". This is how Stefan Hofrichter, head of the global economy and strategy of Allianz Global Investors at CNBC .
"As a currency and asset class, Bitcoin has potentially fatal flaws, which is why we believe it is a question of when, not if, the Bitcoin bubble will break out."
The cryptocurrency par excellence has abruptly dropped from 2,000 percent in the 12 months up to December to a record high of over $ 19,000 coming to trade close to $ 8,700 according to CoinDesk's bitcoin price index .
According to Hofrichter, Bitcoin is not a profitable currency because of its high transaction fees, high price volatility and the impossibility of being used as a store of value. From an environmental, social and governance point of view, Hofrichter also pointed out that cryptocurrency is unattractive due to the high level of energy needed to produce it. Estimates of the total electricity consumption of bitcoins are difficult to measure and subject to debate, but what is clear is to extract the currency involves a huge expenditure of energy.
Add to this the fact that issuing Bitcoin , in jargon 'minare', today requires custom hardware that can cost several thousand dollars. With electricity costs of 6 cents per kilowatt hour and other expenses, it is estimated at $ 8,038. So the earnings of the 'miners' of the cryptocurrency have been roughly halved this month since December so much so that extracting the cryptocurrency is now practically no longer convenient.
The mining is the activity used to "extract" the digital currency: To do so requires programs that can solve increasingly complex algorithms, also because the supply of Bitcoin is limited. Those who make it are rewarded with a quantity of pre-established bitcoins to which must be added the fees of the transactions entered by him in the block. Everything works this way: the network stores transactions in data sets called " blocks " in the jargon . Because a block can be added to the block chain, that is, to the public ledger containing all the bitcoin transactions, it must be closed by someone. To do this you need to find a particular code, which can be guessed by attempts. This operation crystallizes the block, preventing any future changes. This is why the system is decentralized.
Apart from these negative economic aspects, according to many investors and analysts of leading institutions, it is the blockchain technology behind Bitcoin that represents "clearly the potential benefits ", such as the lower costs for transaction verification. Recently, thanks to the work of the Swiss Agora group, the technology was also used to check the votes in the capital of Sierra Leone during the last elections of 7 March.
"It is this aspect of cryptocurrencies in general that we as an asset management company believe to be the most interesting", emphasizes Hofrichter.