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CAPE TOWN - Bitcoin steadied after its biggest drop since June as investors and speculators reappraised the outlook for initial coin offerings.

The cryptocurrency pared a decline of as much as 6% yesterday and was at $4390 (R56839) at 9.39am in London. It’s still up more than 50%since the end of July.

Meanwhile, Bank of America Merrill Lynch says this year’s 380% surge in bitcoin isn’t an anomaly, but is symptomatic of a new era of bigger booms and busts.

Even cryptocurrencies have been outstripped by inverse volatility, and both have far outpaced advances in past bubbly assets such as Japanese equities, according to strategists at the bank.

From the Bank of Japan to the US Federal Reserve, quantitative easing has plied the markets with almost R181.26trln of stimulus and suppressed price swings, encouraging traders to short volatility while risk-taking behaviour has multiplied.

“Post the financial crisis, the largesse of central banks appears to be inducing quicker and steeper price gains in assets compared to the case historically,” analysts including Barnaby Martin said. “Speculative behaviour in assets is cropping up more frequently and in more places than just credit markets.”

That isn’t to say that the bubbles are on the verge of popping, the strategists said. The bullish credit cycle will only end once major inflows cease; those will only abate if there’s an “inflationary shock”, they said.