Bitcoin overtakes 'long tech' as most crowded trade

LONDON: A long position on bitcoin overtook “long tech” as the trade fund managers said was the most crowded in January, Bank of America’s monthly fund manager survey showed on Tuesday.

For the first time since October, a long position on technology companies was knocked off the top spot, as investors said that long bitcoin was the most crowded trade. A short position on the U.S. dollar was seen as the third most crowded.

In a similar survey by Deutsche Bank, investors said bitcoin was in a bubble, with 56% of the participants saying the cryptocurrency was more likely to halve in value in the next 12 months.

Bitcoin hit $40,000 earlier this month, rallying more than 900% since a low in March. It topped $30,000 for the first time on Jan. 2, having breached $20,000 on Dec. 16.

A steeper yield curve was expected by a record 83% of BofA investors – that’s more than after the 2008 Lehman Brothers collapse, the 2013 U.S. Federal Reserve’s “Taper Tantrum” or after the 2016 U.S. election. The expectation of higher bond yields was at or close to all-time highs.

A record 92% of investors surveyed by BofA expected higher inflation over the next year.

Investors were bullish on the outlook for global growth: the proportion of fund managers surveyed by BofA who said that the global economy is in an early-cycle phase, as opposed to a recession, was at its highest in 11 years.

A record 19% of investors surveyed said they are currently taking more risk than normal. The fund managers surveyed by BofA manage a total of more than $500 billion in assets altogether.

The top tail risks to the economy were thought to be problems with the vaccine rollout (30%), the Fed easing its asset purchases (29%), and a Wall Street bubble (18%).

Elsewhere, underowned UK equities saw some money flowing in. But at 15% underweight it remained pinned as the number one underweight region, BofA said.