As markets around the world rebounded from the covid lows mostly riding on a gush of liquidity, global markets veteran Mark Mobius rang a warning bell for investors. The phenomenal rise in cryptocurrency trade and stock markets are correlated and any sell-off in the new asset may lead to a crash in equities, according to Mobius, founder, Mobius Capital.
“There were a lot of people who got richer because of their investment in cryptocurrency. It may not be real money. Nevertheless, as long as crypto market rises, the stock markets will continue to rise and if it starts to fall, stock markets will crash,” Mobius said in a fireside chat at an event conducted by UTI mutual fund.
Mobius said a fall in cryptocurrency won’t hit technology stocks alone but will impact the entire stocks market. He found the rise of cryptocurrency trade surprising. “However, it has made many multi-billionaires,” he said.
Popular cryptocurrencies such as Bitcoin, Ethereum, and Ripple have made astronomical gains in the last one year. Since March 2020, Bitcoin gained 800%, while Ethereum is up 1,242% till date. In contrast, Indian benchmark index Sensex has risen more than 78% from March while gold prices rose 10%.
With cryptocurrencies gaining popularity, Tesla bought $1.5 billion worth of Bitcoin in February, driving up its value and investor appetite. Some recent social media posts of Elon Musk, chief executive officer, Tesla, are also widely considered to be fuelling prices of cryptocurrencies such as Bitcoin and Dogecoin.
Overall, Mobius remained positive on Indian equities, stating the government reforms are creating a positive impact on the economy.
“India continues to be the leader though China is rising rapidly. China is moving from an export-led economy to a consumer economy just like the US. India, on the other hand, is moving towards a more and more export-led economy,” Mobius said.
Meanwhile, maintaining a similar positive stance, Marc Faber, veteran investor and author of Gloom Boom and Doom Report, said Asia is in a sweet spot. He remained optimistic on Asia but found valuations in a few stocks not ‘too low’. “I would invest in India rather than the US, for next 20-30 years. India is well-placed among Asia. I do not see any reason why India and China should have hostile relationships,” Faber said in a separate session at the same event.
Faber said that governments should not intervene in a free-market economy. “Man-made recession induced collapse in economy, and not due to covid but it was due to government actions. Never in history had governments restricted people’s movement outside home and the right to earn livelihoods. The lockdown killed many businesses,” he said.