José Luis Jiménez Guajardo reflexiona sobre BitcoinBitcoin is one of the hottest terms of this century: the ‘cryptocurrency’ revolution has burst onto the financial markets and triggered plenty of debate. José Luis Jiménez Guajardo-Fajardo, General Manager of the MAPFRE Corporate Investment Area, shares his thoughts from the perspective of an investment expert.


There’s no doubt that the word bitcoin, the cryptocurrency that is currently all the rage, has caused quite a stir. Not least because of an increase in value of nearly 1,300 percent in 2017. According to the latest studies on risk assets, this would usually take some 200 years to achieve.

Is it money?

Perhaps the first question to answer is whether bitcoin should be considered money or not. According to Mankiw’s Principles of Economics, “Money is the set of assets in the economy that people regularly use to buy goods and services from other people”. Its main functions are: a medium of change, unit of account, store of value. When in 2010 the programmer Laszlo Hanyecz exchanged 10,000 bitcoins for 2 Papa John’s pizzas, by some measures the cryptocurrency fitted that definition.

In 2010 the programmer Laszlo Hanyecz exchanged 10,000 bitcoins for 2 Pappa John’s pizzas

What is its value?

The second question is linked to the intrinsic value of bitcoin. That is to say the real value of an asset based on the underlying perception of its true value, which includes all aspects, both tangible and intangible. Said value may or may not match the current market value. And yet it can be said that its intrinsic value is unquestionably zero, triggering interesting and heated discussions between its supporters and detractors. However, the intrinsic value of those euros in your pocket is likewise zero, and that’s no reason for particular alarm. In the end, the perception of something’s value is relative and will largely be shaped by supply and demand on the market on which it is exchanged. Another aspect entirely might be the absence of any control from monetary and fiscal authorities, which may lead to fraudulent use of the currency.

Should we invest in bitcoin?

For a value investor, i.e. someone who wants to buy an asset below its intrinsic value, the answer is no. It would not be a prudent, predictable, nor reasonable investment, and to describe it as a risk would be to put it mildly. On the other hand, investors seeking future price growth in an asset (not the current price, but a level it might reach in future), the answers could be manifold. I have even met some investors who believe the value of bitcoin could reach up to one million euros. They argue that supply is highly restricted and demand on the rise. The same is true of other similar currencies, such as Litecoin, Etherum, Ripple, Dash and Monero, which are gradually eroding bitcoin’s market share.

Is there a bubble?

The million-dollar question is whether the asset is in a bubble. A financial bubble occurs when the price of an asset grows significantly faster than its fundamental value (think of the Tulip Fever, the South Sea Company, dotcom companies, and the recent property boom).

Investing in bitcoin is a lottery

There’s nothing new under the sun, and in bitcoin’s case we have a combination of the unknown future for cryptocurrencies, the limited supply of the same, and a stratospheric spike in value. Investing in bitcoin is like buying a lottery ticket; the chance of success is miniscule, but someone nearly always ends up winning.

As a professional investor, I would say the smartest move is to stay away. There are other options that offer greater chance of success, albeit with lower potential returns. Thus, as Eddy Elfenbein has been known to say, I prefer to believe: “A bubble is a bull market in which you don’t have a position”.

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