The cryptocurrency, Bitcoin may be the “phenomenon of the moment” or indeed in a “league of its own” in terms of performance in 2017.
But the question for many, is whether we are looking at a cryptocurrency which is a “fraud”, according to JP Morgan’s Jamie Dimon or a new way of selling apartments, if you are lingerie Baroness Michelle Mone.
Perhaps as much as anything else, these two examples of attitude towards Bitcoin represents the way “internet cash” has divided opinion.
The clue though, comes from what the individual commentator stands to gain or lose from what has been described as a bubble, alongside the “greats” of history such as the “Tulip”, or of course more recently, the “Dotcom Bubble”.
SOURCE: ETX Capital (http://www.etxcapital.co.uk/indices-trading)
However, delving below the surface, investment banks have everything to lose from peer-to-peer secure money transfer, and entrepreneurs getting on the Bitcoin bandwagon, everything to gain. The latter, if only on the basis that there is an element of being on the Zeitgeist and being savvy, if you are familiar with the likes of Dash, Ripple and Iota.
The irony of the whole Blockchain explosion of which Bitcoin is the “poster child” is that it has been so quick in its rise that those attempting to work out whether it is genuine or here to stay have been caught on the hop for no more serious an error than doing due diligence.
The journey to break the equivalent price of gold an ounce (oz) around $1,300 was conquered as early at the Spring this year, while as we head for the end of 2017 the move from $10,000 to $1,500, it has been a matter of just a few days.
The reason for the positive momentum, apart from the massive media coverage and the “fear of missing out” (FOMO), is that while there has clearly been a massive move higher for the asset class. But it could very well be that on a bigger picture scale this is only just getting under way.
For instance, the market cap of less than $400bn for Bitcoin only puts in the league of say an average Dow or Nasdaq blue chip.
Given that the best of the tech giants like Facebook or Apple are up at the $1 trillion level then a doubling or a tripling of Bitcoin from $15,000 could still be on the cards.
For those who are concerned that we may be nearing “peak” Bitcoin though, there are plenty of factors which could mean that the journey higher is set to continue.
Bears like Jamie Dimon have been hurt by the way that the main US trading exchanges, the CME and CBOE have announced they are to offer Bitcoin futures (https://www.ft.com/content/5ee5fda2-daa7-11e7-a039-c64b1c09b482).
This should be the first step on the way for cryptocurrencies to gain respectability, rather than being thought of as a haven for money launderers and tax evaders. Perhaps, most satisfying of all for those owning or trading Bitcoin, is that its latest rise has beaten the market cap of JP Morgan itself, with the $370bn it currently stands at.
To add insult to injury, as far as Mr Dimon is concerned, analysts at JP Morgan have suggested that Bitcoin could become the “new gold”. Perhaps, given the way that Bitcoin has in just a few months been able to go from $1,300 to over ten time the value of an ounce of gold, this is a good example of rear view mirror analysis?
In fact, it could very well be that the only real threat to the rise and rise of the cryptocurrencies is what could be termed a threat from within.
With the technology behind the blockchain changing very quickly, we could find that Bitcoin becomes a Betamax, Ethereum a VHS, and perhaps Iota the DVD. This side of the equation is always going to be difficult to anticipate, with a chance that when a change occurs, investors and traders may inadvertently be “backing the wrong horse”. Whatever happens though, we are looking at a fluid, exciting, area, one which – bubble or not, is set to dominate the financial markets for years to come.
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