Expert says cryptocurrencies could spark the next financial crisis

Cryptocurrencies could spark the next financial crisis, said Brett Heath, head of Canadian firm Metalla Royalty & Streaming, in an interview with Kitco News.

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He compared the digital-asset market’s situation with the dot-com bubble in the early 2000s and the 2008 mortgage crisis.

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“If you look back over the past few decades and consider the financial crises that have occurred, they share a couple of common features. One of them is the widespread adoption of a new financial product or a little-studied technology,” he explained.

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He said that in 2008, such products were mortgage-backed securities. During the dot-com bubble, they were tech companies that really didn’t amount to much.

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“As soon as the public embraced this new financial product, it collapsed, and that was a huge problem,” the mortgage-backed securities expert said.

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He also described cryptocurrencies as ‘a licence for the private sector to print money’ and noted that they do not have intrinsic value.

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According to the Federal Reserve, the total amount of liquid U.S. dollars in circulation has risen four-and-a-half times over the past year. At the same time, the capitalization of the cryptocurrency market has risen more than tenfold.

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He questioned Bitcoin’s ability to outperform gold as a store of value. In his view, the maximum supply of 21 million BTC does not make the asset scarce or valuable. He stressed that there are other cryptocurrencies that are cheaper but have a better technological base.

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Earlier, JPMorgan Chase & Co. suggested that a correction in the crypto market could push institutional investors toward panicked selling of Bitcoin and into gold.

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Societe Generale also favours the precious metal. The financial conglomerate is deterred by the volatile price swings in the leading cryptocurrency.

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