Alarm at bitcoin mania
AUSTRALIA’S corporate leaders are worried investors swept up in bitcoin mania will be hurt when the price of the cryptocurrency crashes from its dizzying heights.
The warning comes as chatter about bitcoin replaces property prices as the hot topic at dinner parties and barbecues across the nation.
Many chief executives and board chairs still are scratching their heads about how bitcoin actually works, with NBN Co chairman and former Telstra chief Ziggy Switkowski – who is actually a rocket scientist – admitting to not fully understanding its inner workings.
Speaking at the Victorian seaside town of Sorrento yesterday, senior business leaders taking part in the annual KPMG Couta Boat Classic sailing regatta voiced concern about bitcoin’s massive price swings in recent weeks.
There were similarities with the infamous Dutch tulip mania of the 17th century, Qantas Airways chairman Leigh Clifford said.
“Some years ago there was a black tulip issue and I fear we may be repeating it’’ Mr Clifford said.
Former Australian Post chief Ahmed Fahour agreed cryptocurrencies were a “hot topic” at dinner parties and barbecues and people would get hurt when the boom turned to a bust.
“Is it any different to people talking about real estate in Melbourne or real estate in Sydney? So, bitcoin is the ‘new’ real estate, and it is just another asset class,’’ Mr Fahour said. “Money will be made but you have got to know what you are doing, like investing in real estate or shares.
“Smart people will be able to make money out of this and unfortunately there will be a lot of innocent people who won’t know anything and will lose a lot of money.’’
Lindsay Maxsted, the chairman of Westpac and Transurban, said he did not believe any cryptocurrency crash would threaten the health of the wider economy.
The mania around bitcoin – which skyrocketed in price to almost $US20,000 last year before slipping below $US14,000 in recent weeks – was a classic bubble, Mr Maxsted said.
“I don’t think it can wreck the entire economy because it is a niche ... I think it is a niche play and obviously on paper and in actuality people who have cashed it in, they have made a lot of money,’’ Mr Maxsted said.
“But it does look like a classic bubble in terms of the underlying intrinsic instrument that has no intrinsic value in terms of a bitcoin.
“Over time there will be a role for cryptocurrencies generally to replace or run alongside traditional currencies.
“But to make money in bitcoin you need someone who will pay more for it that than you paid for it – and that is not a very good spot to be in I think.’’
Mr Switkowski, who holds a doctorate in nuclear physics, admitted to not fully understanding bitcoin.
“I have no insight into what bitcoin might do in terms of pricing, nor do I understand it well enough to get a sense of what impact it will have on the economy,” he said.