A short while ago JP Morgan CEO Jamie Dimon made a comment heard all around the cryptocurrency world, and well beyond—that bitcoin was fraud. Well that comment is turning into a movement as BlackRock CEO Larry Fink has banded with Dimon in saying that governments around the world need to “crush” bitcoin. Dimon and Fink say that the only real utility for the currency is to skirt the law for illicit activities. Dimon’s comments are well known, but Fink adds that the price of bitcoin is an “index of money laundering”.
FINSUM: Bitcoin may be used for a lot of illicit activity at the moment (who knows to what extent), but one thing Dimon and Fink are wrong about is the direction of it. Cryptocurrencies are not going away.
The development of Whole Foods under Amazon has already been fascinating to watch. The company has slashed prices of key items and is accelerating a price war in the grocery business. However, for a vision of what is to come, look no further than Amazon’s own new book stores. Based on Amazon’s new stores, it seems like that in the future customers will find prices for items by scanning them with their phones. Prices would fluctuate depending on if you are a Prime member or have other coupons etc. The tactic allows Amazon to use its pricing algorithms in-store, give customers access to reviews, and track the movement and browsing habits of shoppers.
FINSUM: While we think this is a brilliant tactic for Amazon, we believe it would be a risky bet in a grocery store. Shoppers probably go to supermarkets 20 times for every visit to a bookstore, so the inconvenience of having to scan every item to see a price might hurt the shopping experience.
Bloomberg ran a fascinating and insightful article today about the future of driverless cars. It focused on a rather mundane, but crucially important, technical aspect of the class of cars. That fact is that all the lasers and sensors it takes to run an autonomous car use huge amounts of energy, equivalent to running 100 computers in your trunk at once. What that means is that at least the first class of driverless cars will not be able to be fully electric, but will still need to rely on fossil fuel for energy.
FINSUM: There is a chance that the whole electric car movement might not really take off until driverless cars come out. In that case, there would be a much longer horizon for decent oil demand.
Many professional financiers may think that while the huge price gains in Bitcoin this year may be entertaining, they are ultimately irrelevant to the financial markets. That view may be unwise, however, as Bitcoin holds more mainstream implications than many think. In particular, the tech sector and financials have close ties to Bitcoin, as a big meltdown could wound stocks, including of major names like Nvidia. Bitcoin’s total market cap is now around $150 bn, and it is growing at breakneck speed, making it increasingly relevant and giving it more potential for collateral damage.
FINSUM: Bitcoin is big enough now that a meltdown would cause some worry in other markets. It could end up being a bellwether for bad things to come in core markets.
The gold market has not done as well this year as many may have hoped. Meanwhile, cryptocurrencies have been on a tear, with Bitcoin rising astronomically and arguably being in a bubble. The rise of the alternative currencies has put a dent in gold, as they are both a new alternative to cash, and an x-factor in weighing future price movements in gold. The market for cryptocurrencies, which currently stands at around $140 bn, is about double the size for gold and and gold-mining ETFs. Gold has risen about 10% this year, while Bitcoin has jumped 340%+.
FINSUM: Just as higher rates are bad for gold on a comparative basis, so are cryptocurrencies. Many may think of them as similar to gold—asset stores with little practicality—but they have essentially zero cost-of-carry, making them relatively more attractive than gold. Once the regulatory infrastructure gets in place, cryptocurrencies might make a real dent in the gold market. Will gold vs cryptocurrencies be the new mutual funds vs ETFs?
Goldman Sachs has a big new trade it wants to get into, and it is the last one you would think. Despite JP Morgan CEO Jamie Dimon calling the currency a fraud, Goldman says it wants to get into Bitcoin trading. The bank is reportedly weighing setting up a new trading operation in the cryptocurrency. The possible entrance into the market is a sign of how far Bitcoin has moved into the mainstream from its earlier illicit reputation. Some countries, like Japan, have embraced the currency, while others, notably China, have shunned it for numerous reasons.
FINSUM: Even if Goldman does not enter the market, the currency will benefit from the exposure to mainstream banks.