Many advisors may have an interest in bitcoin, if not from an investing perspective, then at least from student-of-the markets perspective. With that in mind, we wanted to share a chart we found in Bloomberg today. The chart shows where the major growth in bitcoin trading has been this year. In other words, the regions that really drove the wild gains the cryptocurrency has seen this year. The top four countries are China, Nigeria, Colombia, and Venezuela. The idea is that countries which strict money controls, or less stable political and currency environments see more attraction to bitcoin.
FINSUM: The bitcoin rally has really been a product of emerging markets, which is a key factor for understanding its potential durability. We think this supports the idea that bitcoin may be able to maintain its price for some time.
Alongside bitcoin’s meteoric rise, some may be worried about the future of gold. If bitcoin is the new popular value store, where does that leave gold? Goldman says gold will be just fine. For one, Goldman points out that bitcoin’s market cap is around $250 bn, while gold’s is more than $8 tn. Furthermore, bitcoin is much more illiquid and has much higher volatility, which makes it “unlikely to convince investors looking for the kind of diversification and hedging benefits which gold has proven to possess over its long history”, says Goldman. There has been no outflow of capital from gold ETFs alongside bitcoin’s ascendance.
FINSUM: Bitcoin seems unlikely to have any effect on gold demand, at least as long as it is still in a regulatory gray area and intensely volatile.
Anyone watching the amazing (we don’t like this word, but it truly fits here) rise in bitcoin must have asked themselves “what is driving this thing?”. The answer appears to lay in the east, as millions of Asian investors appear to the backbone of the recent gains. There are millions of bitcoin buyers in China, Japan, and South Korea. One commentator from a major trading platform commented “Bitcoin is one of the few markets we’ve ever had in history where you’ve seen these astronomical gains around the world and the retail investors in Asia are the ones driving it … It feels like this whole thing is being driven by the average Joe who isn’t nearly as financially literate as a professional fund manager”.
FINSUM: Remember the huge gains and losses in Chinese stocks a couple of years ago? The pattern seems very familiar, but magnified here. One of the other considerations is that bitcoin is probably being used to skirt capital controls in China, which could, in a way, make demand more sustainable in the near-term.
We don’t run many stories on Bitcoin because, in general, it is not all that relevant to advisors, but from a sheer financial journalism perspective, the cryptocurrency has us at a loss for adjectives. Just a few weeks ago it was trading around $8,000, up from $1,000 at the beginning of the year. Now? It has been trading over $16,000 (it hit $19,000 briefly), up over 1,500% this year. It gained 40% in 40 hours very recently. Many contend the cryptocurrency is a massive bubble.
FINSUM: In our view, only time will tell if this is a bubble. In some ways, if the currency really catches on as a value store, then it may still be very cheap. However, if regulators squash it, then it may be hugely overvalued already.
In what is a rare public spat in Silicon Valley, two west coast tech juggernauts are locking horns. Google and Amazon are in the middle of what looks to be escalating into a blood feud over mutual access to products, especially in the hot gadgets markets (think Amazon’s Echo). The spat has gotten so bad that Google yesterday took the vary rare step of suspending its Youtube service on a number of Amazon devices, including Fire TV. Google cited a “lack of reciprocity” on Amazon’s part as a reason for the move.
FINSUM: Restricting access between major tech companies is not something that has happened very often, so we consider this a major escalation in the battle between the two.
The accusations against Uber seem to have no end. The company is now thoroughly in clean up mode following the departure of CEO Travis Kalanick, but a current court case against Uber is digging up old skeletons. Uber is currently locked in a court case with Waymo, Google’s self-driving car unit, and Waymo has come out with a wild accusation—that Uber had a secret intelligence unit designed to steal trade secrets from competitors. The accusation was so inflammatory the judge halted the case immediately following it. Uber denies such a unit, or any organized attempts to steal trade secrets, ever existed.
FINSUM: This is a wild and slightly believable accusation against Uber. It sounds like something closer to a 1960s Bond movie than Silicon Valley.