A few weeks ago bitcoin was trading at over $20,000 on some exchanges. No it is trading below $9,500. Critics of the cryptocurrency are taking the big fall as vindication of their view, while others are sticking to bitcoin. Other cryptocurrencies slid big too, with ethereum and litecoin both falling around 30%. “The crypto craze is morphing into a crypto crash, from Bitcoin mania to Bitcoin bust”, says a trading analyst, continuing that “that there is no level at which value players step in” when a bubble is bursting.
FINSUM: One of the big problems with bitcoin, as opposed to say the cotton bubbles of American history, is that there is no fundamental underlying economic value of the currency, so there is no potential bottom other than zero.
The end of the exciting but short-lived Bitcoin era may be upon us. As everyone will know, the cryptocurrency surged this year by around 2000%, from $1,000 up to $20,000. However, after worries and threats of regulation, bitcoin has fallen back steeply and is now trading at around $10,000 or just half what it was a few weeks ago. One prominent fund manager commented on bitcoin that “Having no clear fundamental value and largely unregulated markets, coupled with a storyline conducive to delusions of grandeur, makes this more than anything we can find in the history books the very essence of a bubble”.
FINSUM: It is next to impossible to forecast what bitcoin will do, but it should be noted that the cryptocurrency has bounced back from 50% drops before in this big rally.
For the last year there has been increasing public frustration with tech companies. Gone is the general perception of Silicon Valley being inherently good, replaced with an angry skepticism over data leaks, election manipulation, and automation. Now there is tangible change in the air amongst investors too. Jana Partners, along with Calstsrs, have just begged Apple to investigate the iPhone’s impact on kids, and it seems representative of a larger trend against the tech industry. There is also rumbling about regulation on the fringes, and increasing skepticism about the social impact of Amazon, in particular its effect on Main Street, jobs, and inflation (although the general public NEVER misses inflation).
FINSUM: We think there is a big change brewing for the tech industry, and that the next decade will likely be a lot more difficult than the last.
We have been warning that one of the big risks for bitcoin is the threat of regulation, and today that prognostication is looking true. The cryptocurrency plunged yesterday after South Korean regulators took steps to shut down the trading of bitcoin on the country’s exchanges. The government views trading of the currency as akin to gambling. Bitcoin fell as much as a quarter in South Korea and over 13% on global exchanges. It is now trading between $12,000 and $13,000.
FINSUM: Bitcoin is an interesting asset class, but because it operates in a gray area of legality, it is fraught with extreme regulatory risk.
The comment heard round the world seems to have been eating JP Morgan CEO Jamie Dimon. Several months ago Dimon made the much publicized comment that Bitcoin was “fraud”. The CEO is one of the most respected on Wall Street and the comments have been the bane of the cryptocurrency for some time. However, speaking at a conference yesterday, Dimon said about his statements that “I regret making them”.
FINSUM: The funny part of about this new statement is that it was accompanied by several more veiled expressions of dislike for bitcoin, such as saying he is “not interested in the subject at all”.
The tech industry seems to be at the very early stages of a crackdown by regulators. At this point the talk is mostly in media and amongst the public (a few Trump tweets aside), but the push is coming, both on the back of fake news and of anti-trust concerns. Well, there may be a much more immediate threat now. Apple may be facing a near-term regulatory crackdown as its own shareholders are calling for a study into the link between the iPhone and smartphone addiction, especially in children. Apple shareholders Jana Partners and Calstrs are calling for a study to see if the phones are addictive and what negative mental effects they may have on children. Some researchers believe the young have a serious metal health problem related to smartphones, with one academic saying “It’s not an exaggeration to describe iGen as being on the brink of the worst mental-health crisis in decades”.
FINSUM: So Jana and Calstrs, who are calling for this, say it is better to deal with the issue now rather than later and that doing so will provide value to shareholders. If regulations on smartphones actually come to pass, it could change the entire industry.