Former SEC Chair Gary Gensler stated on Wednesday that Bitcoin (CRYPTO: BTC) is driven almost entirely by sentiment rather than fundamentals.
Reflecting on the cryptocurrency market, Gensler cautioned investors about the risks associated with assets lacking solid economic grounding, contrasting Bitcoin with thousands of other tokens.
What Happened: Speaking with CNBC, Gensler emphasized the speculative nature of the crypto market, noting its reliance on sentiment over tangible value.
"This field is almost 99 or maybe one might say 100% sentiment and very little on fundamentals," he said, urging investors to carefully assess their personal risk when engaging with cryptocurrencies.
He highlighted Bitcoin's persistence, driven by global interest from billions of people, but questioned the longevity of the 10,000 to 15,000 other tokens in circulation, suggesting most may not endure due to their lack of fundamentals.
When pressed on whether Bitcoin differs from other cryptocurrencies, Gensler drew an analogy to precious metals, indicating Bitcoin's unique position.
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"The distinction is similar to in metals, there's only two or three precious metals. We humans have a certain fascination with two or three precious metals like gold," he explained, implying that Bitcoin may hold a more enduring appeal compared to other tokens, which he likened to fleeting meme or sentiment-driven assets.
He warned that such tokens, lacking economic substance, often decline in value over time.
Gensler also commented on broader market trends, particularly the role of artificial intelligence in trading.
What’s Next: He acknowledged AI's transformative impact on finance, predicting significant changes in investment management and trading over the next five to twelve years.
While AI currently lags in latency compared to proprietary trading systems, Gensler expects advancements to close this gap, with algorithms increasingly analyzing market sentiment, including statements from figures like Fed Chair Jerome Powell and corporate CEOs, to inform trading decisions.
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