Bitcoin is increasingly 'cultist' and supported by 'magical thinking', says Barclays wealth investment chief

• The zeal around bitcoin is "increasingly cultist" according to Will Hobbs, the chief investment officer of Barclays Wealth & Investments.
• Hobbs also said a rise in interest rates could dent the world's biggest cryptocurrency.
• Yet big names like BlackRock are increasingly interested as the bitcoin rally continues.

Bitcoin sounds "increasingly cultist" and could prove to be a "flightless bird" if interest rates rise, the chief investment officer of a major wealth manager has said.

Will Hobbs, the CIO Barclays Wealth & Investments, said his firm is not interested in the world's biggest cryptocurrency at the moment, despite its recent record-breaking rally. He added that he thought the currency was backed by a "lot of magical thinking."

Bitcoin soared above $50,000 for the first time last week and topped $53,000 on Friday. Increasing interest from big firms from Tesla to BlackRock has added fuel and legitimacy to the rally.

Yet retail investors remain the central drivers, according to analysts at JPMorgan. They said in a note last week that there had been "relatively little institutional flows" over the past 5 months.

Hobbs said Barclays Wealth Management was steering clear of the cryptocurrency mainly because of its wild price swings, a view shared by many money managers.

"It is multiples more volatile than our most white-knuckle-ride asset class, which is emerging market equities," he told Insider.

"In order for an asset to make it into our asset class toolkit, it has to satisfy a couple of things. One, it has to have a positive expected return, obviously. And the other is it has to have some diversification appeal.

"Now it may well be over time that bitcoin satisfies both of those. But at the moment it's very hard to say." Hobbs did not rule out ever delving into bitcoin, saying: "We wait on the sidelines and watch others."

The investment chief said a broader concern is the zeal that bitcoin inspires. "It just sounds like religion… it's sounding increasingly cultist," he said.

"I'm afraid all of the kind of usage ideas that bitcoin's going to replace all forms of money, that's just wild."

However, a handful of big firms have warmed to bitcoin and cryptocurrencies over the last few weeks.

Elon Musk's electric car company Tesla is the most notable, ploughing $1.5 billion into bitcoin in January. BNY Mellon, Mastercard, and BlackRock are among the other firms to have made moves in the sector.

Rick Rieder, BlackRock's chief investment officer, told CNBC on Thursday that customers were searching for other stores of value due to fears of inflation.

"People are looking for places that could appreciate under the assumption that inflation moves higher and that debts are building, so we've started to dabble a bit into it," he said.

Many analysts have said unprecedented stimulus from governments and central banks, which have boosted nearly all markets, have been the key driver of the bitcoin rally.

Hobbs said he thinks a change to this environment of ultra-cheap borrowing could damage the cryptocurrency.

"My hunch is that if real interest rates turned positive, then bitcoin [will] suddenly look like quite a flightless bird. Because if I can get a positive yield from lending to the US or UK government, why am I going to own bitcoin?"

Hobbs said it is too early to tell what the exact nature of bitcoin is. "At the moment, it's primarily a store of value backed by a lot of magical thinking and also [a] big momentum narrative."

"It shows the narrative power of markets... similar to the Reddit story," he said, referencing the GameStop saga.