Strategist warns of short-term volatility for bitcoin, explains how to trade it

Published Thu, Dec 9 20216:36 PM EST

Independent Strategy's David Roche has explained how he approaches bitcoin trading, saying that he's not convinced the cryptocurrency is a viable investment for now. The investment strategist said bitcoin and rival cryptocurrencies are too volatile at the moment, and that the market is still largely driven by speculators. "In the short term, I would say the same sort of investor who buys speculative investments — in equites, in bonds and elsewhere — are the same sort of people who also buy cryptocurrencies," Roche said in a CNBC Pro Talks on Wednesday. "Therefore, I do not look to cryptocurrencies to protect you against risk-off in the markets when risk-off occurs because, as you can see, they can drop 20% while you are sleeping or even napping." This weekend, bitcoin, ethereum and other digital assets suffered sharp losses , as investors fled riskier assets amid fears over the omicron Covid variant. Crypto bulls often describe bitcoin as an asset whose value isn't tied to fluctuations in traditional markets. But analysts have noticed parallels between how the world's top cryptocurrency and the stock market trade. Another common investment case made by bitcoin's backers is that the digital coin can serve as a hedge against rising inflation at a time when central banks are injecting huge levels of stimulus into the economy. Roche said he doesn't see cryptocurrencies as a portfolio diversifier in the immediate term. In the long run, however, he sees digital assets becoming more attractive. "In the long term, the reason why I do believe in cryptocurrencies is because people will continue to want to get out of the way of central banks and governments in their own countries," Roche said. He added: "There are many developed countries where people believe that central banks and governments, in their partnership for the central bank to print the money that the government can spend, are actually vilifying fiat currencies, and they really do not think that in the long term that value will survive." Without providing a specific target on where bitcoin's price will be in years to come, Roche said he thinks bitcoin and other digital currencies could be worth double what they are now in a decade's time. "Would I own them? Yes, I would. But I would not own them on the basis of a forecast for next year but a forecast in 10 years, when I would expect them to at least double," he said. And he doesn't believe central banks' efforts to develop their own digital currencies poses a threat to crypto. People "will not buy central bank digital currencies because that is just buying the national currency issued through a central bank wallet," he said. Roche, who founded Independent Strategy in 1994, was previously the head of research and global strategist at Morgan Stanley . He holds an MA from Trinity College Dublin and an MBA with the highest distinction from INSEAD.

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CNBC PRO Talks: Strategist David Roche on his market outlook and investment opportunities

Pro Talks

Independent Strategy's David Roche has explained how he approaches bitcoin trading, saying that he's not convinced the cryptocurrency is a viable investment for now.