Daily Archives: June 1, 2017

wbur

With guest host Sacha Pfeiffer.

The skyrocketing price of Bitcoin, and the appeal of alternative currencies.

If you bought a thousand dollars worth of Bitcoin in 2010, youd be a multimillionaire today. Alternative digital currencies like Bitcoin were once on the fringe of finance. But theyre gradually gaining acceptance. Theres also Litecoin, Ethereum, Zcash, and others. So-called cryptocurrency has been associated with online crime, but its being embraced by some major retailers and investment firms. This hour On Point: the appeal of alternative currencies. --Sacha Pfeiffer

Paul Vigna, author of "The Age of Cryptocurrency: How Bitcoin and the Blockchain Are Challenging the Global Economic Order." Reporter for the Wall Street Journal, editor of the Journals MoneyBeat blog. (@paulvigna)

Felix Salmon, senior editor at Fusion. (@felixsalmon)

Ben Lee, digital cryptocurrency enthusiast.CEO and co-founder of the mobile app development company Neon Roots. (@BenLeeNR)

Wall Street Journal:Why Bitcoin Is Surging, Again, Up 130% This Year "Bitcoin traded above $2,200 on Monday, according to the news and research website CoinDesk. That was up about 9% on the day and more than 15% from Fridays closing price of $1,913, which itself was a fresh high. Bitcoin is up more than 130% this year alone, and about 397% from one year ago."

Felix Salmon:The Bitcoin Bubble and the Future of Currency "There are a couple of reasons why the bubble is sure to burst. The first is just that its a bubble, and any chart which looks like the one at the top of this post is bound to end in tears at some point. But theres a deeper reason, toowhich is that bitcoins are an uncomfortable combination of commodity and currency. The commodity value of bitcoins is rooted in their currency value, but the more of a commodity they become, the less useful they are as a currency."

Forbes:The Rise And Fall Of Bitcoin (And The New Kid On The Blockchain) "Nobody is denying that bitcoin was disruptive. It was the first cryptocurrency of its time and has made a humongous splash and thats putting it lightly. Every super-government tried to shut it down and none of them could. J.P. Morgan tried to file patents for the exact technology of bitcoin and failed. Bitcoin is (or was) the cool kid at school that everyone wanted to be friends with but no one was sure how to ask for their number."

This program aired on June 1, 2017.

Read the original:
The Bitcoin Bubble: Deciphering Digital Currency46:23 - WBUR

The price of Bitcoin is up 19% since I wrote about cryptocurrencies just two days ago. In two days! Oh wait, no it isn't. It's just fallen 11% in the past couple of hours. This is classic bubble stuff, meaning the price could skyrocket further or collapse in the blink of an eye. Whether or not you own Bitcoin, today I have some ideas about what to do now.

Bitcoin's price was $2,250 (US dollars) when I wrote on Tuesday (see here). When I looked a couple of hours ago it was $2,685. At the time of writing it's $2,396, down 11% from the earlier reading. At your time of reading it could be anywhere.

The world of cryptocurrencies is back in full hype and bubble mode. Wences Casares, the CEO of bitcoin wallet Xapo and a member of the PayPal (NASDAQ:PYPL) board, is reported to have said the Bitcoin price will go to $1 million in the next five to ten years.

Later on I'll come back to whether this suspiciously round, attention grabbing and huge number makes any sense. For now let's just accept that there's plenty of hype and nonsense floating around.

This seems like an apt time to bring out a famous chart of the stages in a speculative bubble. It was produced by Dr. Jean-Paul Rodrigue at the Hofstra University in New York many moons ago.

Bitcoin and other cryptos look like they're somewhere in the mania phase at the momentin Bitcoin's case it's the third time already since it was sparked into existence in October 2008. But each time dizzying delusion was followed by depths of despair it turned out to be temporary. Higher lows and higher highs followedat least so far.

Of course, Bitcoin was something genuinely brand new when it appeared. It's money, but not as we knew it. So the people involved were and are a different crowd to past manias. Still human though, and hence still prone to the same human foibles and vices.

Who's blowing the bitcoin bubbles?

In this case the "smart money" in the chart's stealth phase was a ragtag group of tech savvy anarchists and anti-banksters. Likewise the "institutional investors" don't feature in Bitcoin world. Instead they're replaced by fringe financiers, the odd venture capitalist, and libertarian leaning technophiles.

As for the "public", forget about it. Yes, there are more and more individuals buying cryptos, but they're still a tiny minority. At least in relation to, say, the mania around dot com stocks in the late '90s. But during each Bitcoin boom and bust cycle more people in more countries are drawn in. At least so far.

Here's what they looked like:

It seems pretty clear that Bitcoin is once again in the mania phase of the cycle. But where exactly in the mania phase? I'm guessing "Greed", "Delusion" or "New Paradigm".

But it's hard to know how far we are from the tipping point. In the coming days and weeks, the price could rocket to $4,000, or $6,000, or $10,000. Or it could sink over coming weeks and months to $1,500$1,200$800.

Nobody - and I mean nobody - knows what happens next. No self-proclaimed guru. No independent analyst. No hopeful speculator. No regretful latecomer to the party. Not you. Not me. Nobody.

But that doesn't stop more and more outlandish claims and self-interested hype. Like Seor Casares (he's Argentine) and his outlandish claim that the Bitcoin price should hit $1 million in five to ten years.

Million dollar Bitcoinreally?

Of course he could be right. But I'm going to have a stab at seeing whether it's likely, using nothing but common sense. Here goes

Currently there are 16.3 million Bitcoins, and I estimate this will reach around 19 million in five year's time. The growth rate slows down as the ultimate limit of 21 million approaches.

If a single Bitcoin is worth $1 million then all Bitcoin would be worth $19 trillion. In the past article I showed that Bitcoin was 46% of the total value of all cryptocurrencies, which in total were worth $80.3 billion.

On the (perhaps generous) assumption that Bitcoin maintains its market share, in the face of unlimited crypto competition, that implies the total crypto market would be worth $41.3 trillion when Bitcoin is priced at $1 million.

According to estimates by Credit Suisse, total global household wealth was $256 trillion in 2016, of which $157 trillion was financial assets. Wealth has grown at an average 5% a year since 2000. Assuming that growth rate continues, total household financial assets would be around $200 trillion in five year's time.

Financial assets include bank deposits (and a little physical cash), stocks, bonds, investment funds, precious metals and so on. For Bitcoin and other cryptos ("Altcoins") to take off they basically have to replace a large piece of bank deposits.

A necessary condition of anyone getting involved with cryptos is that they have internet access. Even today around half of the world's population is offline completely. And many of those supposedly online don't have regular and easy access, so perhaps the true percentage of people with regular and easy internet access is only 35-40%. It keeps growing, but still has a long way to go.

Of course most of those without access are poor, meaning they control little wealth. The combined household wealth of North America, Europe and Asia Pacific is 85% of the total. Strip out the poorer parts of Asia and let's say cryptos' potential market consists of people that control roughly 75% of global wealth.

That indicates $150 trillion of relevant financial assets in five year's time (75% of $200 trillion). Americans have just under 20% of their financial assets in deposits, Europeans just over 40%. Add in wealthy countries from Asia Pacific, in particular Japan, and let's say 35% of those financial assets are bank deposits. That comes to $52.5 trillion.

In other words, if the Bitcoin price hits $1 million then all Bitcoins would be equivalent to 36% of the bank deposits of people with the internet ($19 trillion divided by $52.5 trillion). And if Bitcoin has the same market share of all cryptos at that time as it has now, then all cryptos would be equivalent to 79% of those bank deposits ($41.3 trillion divided by $52.5 trillion).

My numbers are just rough estimates. Even so, looked at this way it becomes pretty clear that $1 million Bitcoin is a fantasy. Like me becoming an astronaut at the age of 45 and both coming from and living in a country with no space programme.

A couple of days ago all 16.3 million current Bitcoins were worth $37 billion. Making the same assumptions as above, current bank deposits of people with internet access would be $41.2 trillion.

That means Bitcoin is equivalent to about 0.09% of potentially convertible household deposits. Put another way, that deposit base is about 1,100 times bigger than the value of all Bitcoins.

What if, in five years, it gets to 1%, or 1-in-100? Which is to say 11 times its market share of relevant household deposits today? That would be $525 billion, split across those 19 million projected future Bitcoins, giving a price close to $28,000.

That's still over 11 times today's price, but it's a hell of a long way from $1 million. It's also not a prediction. I'm just trying to show a more realistic potential level. But don't forget that Bitcoin faces plenty of new competition, most recently from Ripple and Ethereum.

Where does it go from here?

Personally I don't think that cryptocurrencies will replace fiat currencies in a meaningful way. At least not for a very, very long time. Instead, governments and banks will come up with ways to use cryptos' blockchain technology - the wizardry that makes it all function - to improve fiat currency transaction infrastructure.

That said cryptos will probably have a larger niche than today. But my guess is it will still be a niche, and life will be viciously competitive within that niche. Picking winners and losers will be hard, and the ride will be wildly volatile.

In these bubbly times, here's what I recommend you should do today, depending on your situation:

One final thing. The whole crypto world is a prime location for fraudsters. Crooks swarm towards bubbly markets and the prospect of easy money like flies to doo doo. Always have. Always will. It's even easier to get away with when you can wrap everything up in high falutin' techno babble.

Most crypto websites are packed with serious sounding jargon, ideological fluffiness, pretty pictures and general hype. But a great many provide no or few details of who's involved or where they are in the world. They just hover in the internet ether.

When the greedy humans behind some of them run off with their customers' money, as has happened already and is bound to happen again, there will be little recourse. As with all things, caveat emptor ("buyer beware").

As Bitcoin and the other cryptocurrencies go berserk make sure you ignore the more outlandish claims made by their cheerleaders. Even so there's still a good chance many prices rise substantially in future, even if there's a crash in between. View all cryptos as speculation and good luck if you choose to get involved.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Excerpt from:
Bitcoin Goes Berserk - Seeking Alpha

Danny Coxof Hargreaves Lansdownsaid: "We have seen a handful of clients asking for the ETN, so its not purely driven by a provider wanting to be listed [on the Hargreaves platform]. We are making it available to self-select investors in the same way we offer access to around 3,000 other exchange-traded funds, notes and commodities."

Hargreaves customers can hold the bitcoin investment in their self-invested personal pension(Sipp) or a normal broking account.

Mr Cox added that Hargreaves already allowed investors to access the Bitcoin Investment Trust. The$389m fund isrun by Grayscale Investments, which specialises in "crypto-currencies".

"By adding self-service, online dealing, the team at Hargreaves Lansdown is providing UK investors with professional and quick access to bitcoin in the UK and greater Europe," saidRyan Radloff, XBT's head of investor relations.

Crypto-currencies came to noticefollowing the launch of bitcoinby a developer under the pseudonym ofSatoshi Nakamotoin 2009. Online currencies are beyond the control of the worlds central banks and allow anonymous transactions. They operate using a digital ledger of transactions known as a blockchain.

The price of bitcoin has surged since the start of the year.Its price indollar terms has more than doubledfrom less than $900 to more than $2,400 today. Currently one bitcoin equals 1,902, 2,145or $2,422, according to CryptoCompare.com.

The currency also hit the headlines last monthwhen the hackers behind the WannaCry cyber attack that took down parts of theNHS IT system demanded ransom payments in bitcoin. The currency has long been linked to the online underworld.

Go here to read the rest:
Britain's largest broker offers bitcoin investment - Telegraph.co.uk