Unless you have head your head stuck under a rock for the last 12 months, you have heard of Bitcoin and how the price of the first crypto-currency has skyrocketed this year. After hearing about this 'once in a lifetime investment opportunity,' I am sure most of you have thought about buying some digital currency. Maybe some of you have even taken the next step and bought some. (Congratulations to those of you who did.)
But as the saying goes, 'Pigs get fat, hogs get slaughtered,' I hope for your sake you are a pig and get out while you can. Unless you got your hands on some Bitcoin's in the last week, you have made money.
A recent Bank of America Merrill Lynch survey found that the Bitcoin traded is one of the most crowded trades on Wall Street, which obviously explains some of its massive run-up. Bitcoin's amazing performance over the last year now appears to have attracted some very risk-averse investors.
We have seen the price of Bitcoin fall 30%, 40%, even 50% in just a years' time. But, investors keep running into the asset and pushing the price to new all-time-highs.
This riddle could be paraphrased as “It is almost worth the gold reserves of France (World #5), it is what all want now at the price of 2016, you would be eager to have it as a gift last Christmas, it stands at 14 GDPs of Kyrgyz Republic (my motherland)”. Yes, you got it right, it’s a Bitcoin - notorious, attractive and, of course, risky.
Last week the market cap of this coin hit an all-time high at the 99+ billion dollars increasing ten times from what it was just a year ago.
Chart 1. 1-year dynamics of Market Cap of Bitcoin in USD
As the Bitcoin phenomenon rolls on, we continue to see new prospectuses for possible Bitcoin funds despite the Securities Exchange Commission denying the creation of one Bitcoin Exchange Traded Fund due to the lack of market surveillance and regulation. Oddly enough, the currency was started to give its user autonomy from governments and other regulatory agencies.
So the main reason why the currency grew in popularity is the reason why investors are finding it difficult to invest in the asset. Thus far two different proposed Exchange Traded Funds have been denied in the US, but it would appear the once denied Winklevoss Bitcoin ETF might have a chance of being approved the second time around. What is interesting is that the Winklevoss Twins were not the ones who filed the petition for reconsideration of their ETF, it was the Bats exchange, which the proposed ETF would trade on if approved. Continue reading "Bitcoin Bonanza Rolls On"→
Last week, the price of one Bitcoin surged above $1,227, the price of an ounce of Gold. And the headlines soon followed, screaming, “Bitcoin worth more than Gold.” The implication, of course, that Bitcoin is the new Gold in the world. In reality, however, Bitcoin is hardly the “new” Gold, real or digital.
In arguing for Bitcoin’s allure, enthusiasts tend to fall back on one singular point; like real Gold, there is but a finite number of Bitcoin that could be mined (21 million to be exact). But that is hardly the case. Bitcoin’s allure is not a factor of its rarity, but rather its ecosystem. That ecosystem enables financial transactions between two parties, both anonymously, and at very low costs. The fact is that that ecosystem could be easily replicated with an alternative to Bitcoin. So, while the number of Bitcoins we can mine is limited, the amount of alternative ecosystems that could emerge for Bitcoin wannabes is not. In fact, even today, there are already 12 different alternatives to Bitcoin, including Litecoin, Peercoin and Primecoin.
However, there is one area in which Gold and Bitcoin have something in common and, unfortunately, for Bitcoin bulls, it is in their vulnerability rather than strength. Both Bitcoin and Gold do not pay interest like a currency, nor a dividend like a stock. And when interest rates rise the allure of Bitcoin and Gold quickly fades. Because, simply put, there are better alternatives. Continue reading "Bitcoin Is NOT The New Gold"→
If you want to know what's going on in the markets, just look in the mirror. In one moment, investors are bullish and the next moment, very bearish. It just shows you the skittish nature of the market that we are in.
How do you feel about the market? Leave a comment below and tell us how feel.
Despite last week's wild gyrations, the markets closed lower for the week. This is the big picture you really want to watch and pay attention to. Looking at the S&P 500, as it represents a broad swath of the markets, this index closed out last week at 1,982.85, down 1.3% for the week. This was the lowest close in this index in over six weeks, not exactly a stellar picture. Again, when you look at the bigger picture, a clearer picture emerges of what's going on.
The same dismal story can be applied to the NASDAQ that closed down 1.44% for the week, closing at 4,513.44. Last week's close represents the lowest close for this index in six weeks, again not a good sign.
The Dow also closed lower for the week but still managed to have its third-highest weekly close in history. This morning the DOW gave its first serious indication that things are beginning to come apart as it joined the same picture as both the NASDAQ and the S&P 500. A weekly Trade Triangle flashed a exit and sideline position for this index. Now, just like the S&P 500 and the NASDAQ, the DOW is indicating that you should be out of market at the present time and on the sidelines.