The crypto currency is generating a lot of investment activity, but it could be growing into a potential bubble. Some of the characteristics of the market, like rapid appreciation, are reminiscent of the 2007 mortgage crisis and potentially the Dot Com bubble in the early 2000s. One bit of good news: the investor pool is much less diverse. We sat down with Jeff Rinkov, CEO and president of Lee & Associates, to find out more about this new investment market, why there is real cause for concern and how a bubble burst could affect commercial real estate.
GlobeSt.com: What do you think of Bitcoin as an investment vehicle?
Jeff Rinkov: I think we are going to be slow on the adoption of it. People really like the comfort of US dollars. Right now, it feels like it could be a black swan event. If I had to make a prediction, I would short Bitcoin over the intermediate term, say the next six to 12 months. Digital currency, as ecommerce evolves and the world becomes a little smaller, is probably something that becomes more comfortable for us and likely as a greater utility.
GlobeSt.com: What are the fundamentals that are driving all of the investment activity in Bitcoin?
Rinkov: I think the key fundamental is momentum right now, and nothing else. That is tremendously dangerous. It feels like a real estate market with a tremendous bubble, like the residential market in 2007. Why were people investing in home mortgages in 2006 and 2007? It is because of rapid appreciation. You could sell lower quality loans as part of the tranche of a lower investment for more and more money. Today, you seem to have a lot of fast and loose money and a lot of capital in the market looking for yield and they have found this. The second that it goes sour, they will abandon it. That doesn't mean the concept of digital currency is bad, but it does mean that they abandon it as a super investment vehicle.
GlobeSt.com: How would a Bitcoin collapse affect commercial real estate?
Rinkov: It is the broader economic impact, and that always has an effect on commercial real estate. Right now, it is a big topic of conversation, although we haven't seen any real adoption of Bitcoin being accepted at retail stores or for rental payments. I don't think it is that wide spread in its ownership yet. I think people losing money or people losing steam does take some air out of the market.
GlobeSt.com: You mentioned the 2006 mortgage crisis. Does Bitcoin also mirror the Dot Com bubble in the early 2000s?
Rinkov: There is the potential that it will mirror it, but the Dot Com bubble had tremendous buy-in over a long period of time. It had institutional buy-in, consumer buy-in, layperson buy-in. Bitcoin has just scratched the surface of who is really buying and who is really trading it.
GlobeSt.com: Who is investing in Bitcoin?
Rinkov: It is a smaller pool, and right now, it is more speculative individuals and institutions. Institutions are taking a small bite for diversity purposes and the fact that they want to have exposure to it. You are missing a big tranche of capital.
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Kelsi Maree Borland
