Bitcoin is “still a very small market in the context of the larger financial world, but it has had a huge year,” McNamee said on “Fast Money.” We’ve done it around a speculative mania…”If a mania goes on long enough, it becomes self-fulfilling. Even after a crash, what follows is a legitimate industry.”
McNamee compared it — favorably — to the dotcom bubble that occurred at the turn of the millennium, recognizing that although the bubble caused a brief recession it spawned a legitimate, transformative industry.
The key, he said, is that bitcoin continues to captivate investors long enough that the “mania” becomes “self-fulfilling,” and he believes that this will be apparent by the end of 2018.
“With the amount of activity going on around it, there are people willing to invest the kind of dollars it takes to make a thing like bitcoin into a long-term part of the financial market,” he said. “You’ll have these big swings, up and presumably down, as well. And, you know, wherever that settles out I think will tell us a lot about the role of bitcoin long-term.”
Increased Institutional Involvement Needed to Prevent Collapse, Says Economist
McNamee is not the only industry observer who believes bitcoin has reached a crucial juncture in its short history.
Mohamed El-Erian, the chief economic adviser at European asset management giant Allianz, said earlier this week that he believes bitcoin’s recent downtrend could prove to be a “moment of truth” for the upstart cryptocurrency.
Noting that, despite the advent of bitcoin futures, institutional investors have yet to make a splash in the cryptocurrency markets, he said that how Wall Street responds to the correction could prove decisive in the asset’s long-term trajectory.
“Either this sharp price correction will act as a catalyst for expanding…institutional involvement in this market — or it will become a stage in the deflation of a remarkable and historic asset bubble,” El-Erian concluded.