After bitcoin’s recent plunge and subsequent partial recovery, analysts at Societe Generale argued in a recent note that questions remain around the cryptocurrency’s place in investment portfolios
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“It comes as no surprise that the place of Bitcoin in any investment portfolio remains highly contested, precisely because of its erratic price movements,” Societe Generale’s Alain Bokobza and Arthur Van Slooten wrote in a Thursday note.
On Wednesday, bitcoin dived 30% to nearly $30,000 at one point, before paring some of those losses. Other cryptocurrencies were not spared as the overall value of the crypto market dropped by hundreds of billions of dollars in a single day. Bitcoin later recovered to hover around the $40,000 level on Thursday.
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Bokobza and Van Slooten argued that the risks to bitcoin “remain on the downside,” citing factors such as potential regulation ahead, which the two characterized as the “biggest threat” looming for the cryptocurrency.
The U.S. Treasury Department on Thursday announced that it’s taking steps to regulate cryptocurrency markets and transactions. China has already been cracking down on the sector since 2017.
The analysts also noted the influence of “confusing” communications from electric vehicle maker Tesla. The company previously said it would accept bitcoin as a form of payment for its cars before CEO Elon Musk tweeted last week that the firm has “suspended” vehicle purchases with the cryptocurrency over environmental concerns.
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The analysts also questioned the comparisons often made between gold and bitcoin due to the gap in volatility as well as the magnitude of their price movements. Some investors have argued that the cryptocurrency is a potential competitor to gold as a store of value.
Since the start of the year, spot gold has fallen about 1.2%. In a similar period, bitcoin is still up around 38% despite its recent drop.