DoubleLine Capital CEO Jeffrey Gundlach warned on Monday that bitcoin may be overheated after its massive run in recent months.
“I don’t like bitcoin here. I don’t like things that get on a wooden leg like that,” said the so-called Bond King in CNBC’s “Interval Report”. “Bitcoin, for me, is now kind of in bubble territory in terms of how it acts.”
Gundlach’s comments on Monday came when the price of bitcoin fell dramatically to less than $ 33,000 per digital currency. The cryptocurrency on Friday hit a record high of almost $ 42,000 before it started to retreat. Bitcoin, however, is still above 75% in the last month and more than 380% since April 1.
Bitcoin’s big recovery came amid the coronavirus pandemic, with governments around the world launching massive stimulus efforts to help struggling economies. This raised concerns about inflation for some investors, and bitcoin was an asset they resorted to.
The increased adoption of bitcoin in general by institutional investors was another factor that helped propel its rise. And some people, like prominent value investor Bill Miller, believe that digital currency has more room to run – although they admit that its volatility is likely to remain.
“The total supply of Bitcoin is growing at less than 2% per year and it is obvious from the price that demand is growing much, much faster than that,” Miller told CNBC on Friday. “In the meantime, bitcoin is likely to rise more and perhaps considerably higher.”
Gundlach acknowledged that there is a potential for bitcoin bulls to be proven correct.
“The people who point out that he has an incredible supply and demand dynamic, if the institutions really get involved, they are right,” said Gundlach. “This is what can create these massive movements in bitcoin.”
In January 2020, Gundlach predicted a short-term high for bitcoin, potentially as high as $ 15,000 per currency in the year.
The investor has a more negative view in other instances. For example, in December 2017, Gundlach said, “If you sell bitcoin today, you will make money”. At that point, bitcoin was trading above $ 16,000 per currency. It would drop dramatically, losing well over half its value in December 2018.
Gundlach, in explaining his current position on bitcoin, said on Monday that he fears investors have become too optimistic.
“I think all of these things are already in their infancy and the place to sell is bad,” he said. “Even the dollar, I have been very negative against the dollar since January 2017, but in fact I was neutral against the dollar a little lower than we are now … just because these things seem to have also reached deeply in the narrative of consensus. “
“There are times when … people seem to be on the side of the boat so much that I really don’t believe the boat can sell so well,” added Gundlach, “and I believe that’s where bitcoin is on the bullish side right now.”