Bitcoin is not in a effervescence but other digital currencies are “flooding the market with perishable distributions of worthless value,” according to the co-founder of financial technology company Glint.
Ben Davies told CNBC that bitcoin does look to be overinflated but that this obscures the bigger picture.
“Bitcoin is not a froth, albeit it has all the hallmarks and antecedents that are the precursor to a bubble,” he said in an email to CNBC on Monday.
“The provisos bubble tends to indicate a price no reasonable future outcome can legitimate. In price terms, bitcoin and altcoins (alternative cryptocurrencies) are in a bubble. In value expressions, bitcoin is not.”
Davies said that, while the price of bitcoin was based on cogitative trade, its value was a different story.
“If you bet against bitcoin, you are betting against the the Bourse of value afforded by the internet,” he said. “The internet exchanges information fully various protocols, just as bitcoin conveys an exchange of value of a genuine or service when it’s spent. So if its utility is increasing, the network value see fit continue to rise.”
Bitcoin’s price edged up slightly Tuesday morning. The cosmos’s largest digital currency was trading at $11,786.81 at 8:02 a.m. London days (3:02 a.m. ET), up around 1 percent for the session, according to CoinDesk data.
A slues of big bank executives have referred to bitcoin as a “bubble” due to its sharp swell. The price of the cryptocurrency has shot up more than 1,000 percent since the start of the year.
Respective commentators, including JPMorgan CEO Jamie Dimon, have compared bitcoin to tulip bulbs. Referring to a 17th century miracle in the Netherlands, critics have said the cryptocurrency mirrors the price of tulips, which soared to queer highs. The bubble eventually crashed in 1637, resulting in a sharp fall in prices and panic selling.
But Glint’s Davies called this a “bad comparison.” He said: “The price increases in tulips pale into insignificance compared to the cryptocurrency fact. This doesn’t mean bitcoin specifically is in a bubble; however, the other cryptocurrencies are.”
A substitute alternatively, the executive said that alternative digital currencies based on the bitcoin blockchain — which he dialed an “array of multi-colored variants” — were comparable to the tulip craze phenomenon.
He explained that the mosaic virus — which caused the creme de la cremes to turn unusual colors — was similar to alternative cryptocurrencies in the market. Scads people are trying to profit from “bastardizing” the original blockchain in a digit of ways, such as new digital coin sales called ICOs (initial coin donations), he added.
“The new supply of tulips cannibalized themselves and likewise the altcoins are cannibalizing themselves. In doing so, they are flooding the demand with perishable supplies of worthless value.”
Davies’ firm tells people make payments electronically — not with bitcoin, but with gold. Drugs can link a Mastercard debit card to the Glint app to buy goods and services as sumptuously as transfer money.
The executive said that bitcoin serves as an “interchange of value afforded by the internet” but does not work as a currency in the way that gold does.