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This Is the Week Wall Street Went Nuts Over Cryptocurrencies (bloomberg.com)

Posted by msmash on from the growing-trend dept.

Wall Street banks that weren't already on the bitcoin bandwagon appear to be piling on, or least eyeing seats, after the cryptocurrency surged to all-time highs this week on the way to $6,000. From a report: Analysts are working to keep up with demand from clients for information. UBS and Citigroup published extensive explainers on blockchain technology, while senior executives at JPMorgan Chase warmed to the cryptocurrency during the bank's third-quarter earnings call. The digital currency has risen more than fivefold after trading at less than $1,000 as recently as December, breaking the $5,000 mark this week and already targeting the next thousand-dollar level. Throughout its rise, the cryptocurrency shrugged off tighter regulations, feuding factions and warnings from the likes of JPMorgan's Jamie Dimon of fraud and an eventual price collapse.

23 of 180 comments (clear)

  1. Bubble! by XXongo · · Score: 4, Insightful
    http://www.investopedia.com/te...

    What is a 'Bubble'
    A bubble is an economic cycle characterized by rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset M and driven by exuberant market behavior.

    1. Re:Bubble! by JesseMcDonald · · Score: 4, Interesting

      You can't categorically declare that Bitcoin's price is "unwarranted by the fundamentals of the asset". It's a new asset type and its fundamentals are yet to be determined. We're still feeling out Bitcoin's ultimate utility and long-term viability. Surges like this are inevitable.

      We've gone through this process several times already. Each time people have declared it a "bubble", and yet... while each surge has been followed by a "crash", the average price after each crash has been significantly higher than the average price before the preceding surge. This was true at $2, $30, $200, $1200, and $4000. The long-term trend has been toward gradually increasing prices and less volatility.

      --
      "The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
    2. Re:Bubble! by Lisandro · · Score: 5, Insightful

      Gold is not valuable because it is tangible; it is valuable because it is scarce. So is Bitcoin, BTW. Much like gold, as a currency it is inherently deflationary.

    3. Re:Bubble! by Lisandro · · Score: 2

      Well, no, not really. Disclaimer: i'm not yet quite sold on the concept of crytpocurrencies, but i've been studying them for a while.

      Bitcoin and other digital currencies do have utility and their value (specially in the case of Bitcoin) is derived from scarcity and the effort required to "mine" new currency. The main problem with BTC is that right now its market is minuscule and limited almost exclusively, as you explain, to value exchange. Relatively small operations can make its USD value change dramatically overnight; BTC is volatile because it is not widely used, and it is not widely used because of its volatility. I don't know if it will ever overcome this issue.

      Other than that, the design behind Bitcoin is technically very sound - not only in terms of crypto but also economics. Whoever came up with it did its homework.

    4. Re:Bubble! by Lisandro · · Score: 2

      What happens when the cost of the computing resources required to generate more falls below the marginal selling price of a bitcoin?

      Nothing more than someone gaining money easily, but we'll likely never hit that point. The amount of BTC available for mining is fixed; by next year over 80% of it will already be mined. A conservative estimate is that the last block will be mined in 2140 (by virtue of the block reward halving frequency every four years), but it is posed to happen way before. Right now a new block is mined every 9% in average, which is already 10% faster than the estimate.

      Then there are other systemic issues due to the origin of its value in illegal activities making it target for not just every imaginable regulation but making the holding itself illegal and subject to sentencing and fine/prison. This does happen and is targeted at stopping those illegal activities. For instance, try crossing an international border with a million in undeclared USD and see what happens.

      You can cross an international border with a million USD in undeclared bank assets and no one will ever know. BTC is the exact same in that regard.

      Now, i agree that the legality of cryptocurrencies is a big question mark and i have no idea how this will evolve in the future. In general governments don't like what they can't control nor tax.

    5. Re:Bubble! by liquid_schwartz · · Score: 2

      Bitcoin is a fixed amount currency, with only about 21 million BTC available. If it popularity increases prices will go nowhere but up.

      And that _if_ is the rub. If it becomes more popular you are indeed correct. If it doesn't then it's useless. As others have noted bitcoin is just a different flavor of Fiat currency - it has no intrinsic value. I

    6. Re:Bubble! by Lisandro · · Score: 2

      In all fairness, nothing has intrinsic value. Not even gold.

    7. Re:Bubble! by Archangel+Michael · · Score: 2

      Bitcoin has intrinsic value above nominal fiat currencies, in that it is not influenced by central banking authorities or government programs that devalue currency. This makes it ... deflationary in nature, and hence the pricing spike.

      The primary value in our current Fiat currency is that it is credit based value because it is inflationary. It is better to spend a dollar today, than save it for a marginal return that might not match the inflationary pressure on that currency. It is why most wealth is not maintained in currency form, but rather assets that increase in value faster than inflation.

      It is my opinion, that the combination of inflationary pressure on nominal fiat currency, and the deflationary pressure on cryptocurrencies like BitCoin, are both being reflected in the nominal currency to Bitcoin exchange rate. I am also sure that some of that is indeed "bubble" valuation. The question is, two fold, when is the bubble going to burst, and what is the proper current valuation of Bitcoin, relative to nominal currencies.

      --
      Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
    8. Re:Bubble! by mysidia · · Score: 2

      What happens when the cost of the computing resources required to generate more falls below the marginal selling price of a bitcoin?

      Chances are the people who bought those resources Already made their profit, because they did the calculations.
      The marginal cost of continuing to operate that hardware is very small though, particularly in certain parts of China where they get free electricity.

      At the point it becomes non-profitable to CONTINUE to operate bought and paid for miners, they either RAISE THE BAR FOR TRANSACTION FEES, so users pay a little more, or shut off, and the hashrate goes down ---- and eventually profitability of the miners increases, so it's self-correcting.

    9. Re:Bubble! by Anonymous Coward · · Score: 2, Insightful

      My personal fingernail clippings are very scarce. But they are worthless since no one desires them.

      The moment people realize the Bitcoin is simply a shared delusion then we will see who the greatest fool of investing lore is, exactly.

    10. Re:Bubble! by mysidia · · Score: 3, Interesting

      It is why most wealth is not maintained in currency form, but rather assets that increase in value faster than inflation.

      Perhaps.... but imagine a world with a deflationary currency. In order for businesses to persuade you to invest in their business or their debts, the bar for investing will be a much greater return --- because the business will have to increase in value faster or pay in interest a rate of interest you expect to be greater than the rate at which the deflationary currency increases in value, thus the cost of capital will be high, and businesses will be more responsible and careful with $$$ they spend not to waste it, Whereas with an inflationary currency it is almost a "Given", that tangible commodities and businesses will become worth more currency over time.

    11. Re:Bubble! by DontBeAMoran · · Score: 2, Insightful

      Somebody, somewhere, has a price listed for those items. Are they insured? Check their value there.

      --
      #DeleteFacebook
    12. Re:Bubble! by MangoCats · · Score: 3, Insightful

      Gold is very valuable because people have, throughout the past many hundreds of years, considered it very valuable. The fact that it is hard to mine, relatively easy to refine and store, etc. does help, but in the end the value of gold comes down to people's willingness to pay for it - and that willingness to pay for it has much more to do with its historical value than its current and future intrinsic worth, it's just a financial investment.

      Bitcoins have negative intrinsic worth, but they've managed to hang on as the "cybercurrency of choice" even while they are hardly differentiable from dozens, maybe hundreds of alternate blockchain based cybercurrencies. The only thing propping up bitcoin is people's willingness to continue paying for it and mining it. It's worse than betting on Coke or Pepsi. But, then again, plenty of people got stinking filthy rich by investing in Coke, or Pepsi.

    13. Re:Bubble! by Bruce+Perens · · Score: 2, Insightful

      Cryptocurrency is inflationary, because anyone can create a new cryptocurrency.

      --
      Bruce Perens.
    14. Re:Bubble! by Khyber · · Score: 2

      3.5 billion pounds for the British Crown Jewels.

      Hope Diamond? About 220 million at current market price per carat.

      I am a certified GIA appraiser.

      --
      Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
    15. Re:Bubble! by Powercntrl · · Score: 2

      Cryptocurrency also has all these advantages--it too is very difficult to corrupt, is fairly rare, and will remain after natural disasters. It even avoids the downside of being heavy.

      Crypto's rarity is simply an agreed upon constraint by its userbase. There's absolutely no reason it couldn't be forked to spew out more "coins", if most of the miners decided more is better than less, and updated to the new fork. To look at it another way, Bitcoin's rarity hinges on the same aspect of the human psyche which enabled Donald Trump to become president (as long as enough people agree to support something insane, it can happen).

      Unless there's some crazy breakthrough in the cost of nuclear transmutation, gold is going to stay rare.

      --

      ---
      DRM is like antifreeze, to the MPAA/RIAA it's sweet, to the consumers it's poison.
  2. Oh for fucks sakes by rsilvergun · · Score: 2, Insightful

    it's only valuable because it's backended by a ton of illegal activity (money laundering, gambling, drugs, ransomware). Nobody's buying much of anything legitimate with this stuff because it's not backed by governments, no will it be. Sooner or later the government will crack down and it'll all collapse.

    Wall Street has always been a combination shell game and method for the ruling class to skim 50-60% off the economy without doing any real work, but this is just ridiculous. Come to think of it that's the only way I could see Crypto currency get a kind of legitimacy. I could see the ruling class forcing us to use it to buy stuff so they can skim even more off us working stiff's wages. Like credit cards but without the convenience and buyer protections.

    --
    Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
    1. Re: Oh for fucks sakes by Jzanu · · Score: 2

      I am cautioning everyone now from being stupid because there is only one direction for bitcoin and all the crop of virtual currencies to go - and that is to $0. Then they will be screwed financially, and given the typical age here that means they will have lost their retirement incomes. Don't be so stupid, and stop lying to others for your own temporary benefits.

    2. Re:Oh for fucks sakes by codebonobo · · Score: 2

      Yes, Bitcoin is primarily purpose is for regulatory arbitrage and thus exists as a hedge against anarchism where states indirectly subsidize its value. The most effective way for states to attack bitcoin is to legalize everything and eliminate all taxes which I don't think is very realistic to ever occur thus feeding into the value proposition of bitcoin. There is a circular economy of the under-served who need bitcoin to survive and these users create an inelastic demand on a disinflationary supply of bitcoin driving up the price. States can no more stop copyright infringement or drug use than they can stop bitcoin.

  3. So where can I go short on bitcoin? by Wrath0fb0b · · Score: 3, Insightful

    So in a functioning market, investors should be able to go long or short on an asset -- that is, it should be possible to assert that it will rise and to assert that it will fall (or if you're clever, buying options that assert the price will remain right where it is).

    As far as I can see, a hypothetical person that wanted to bet that bitcoin would fall doesn't really have a vehicle by which to take that position.

    1. Re:So where can I go short on bitcoin? by JasonVergo · · Score: 2

      There are a number of exchanges where you can short it. https://www.bitmex.com/ is one of them.

  4. Thank you slashdot by JasonVergo · · Score: 3, Funny

    Back in 2011, Slashdot had a post about bitcoin. I thought it sounded interesting. So, I mined some and sent some money via dwolla to tradehill to mt.gox or something crazy like that and bought some. That $300 is now worth over $250k. I don't remember there being that many hater on the thread back then. If there were, I'm glad I didn't listen to them.

    1. Re:Thank you slashdot by Jzanu · · Score: 4, Insightful

      I'm German, I just hate the direction of the US led economics and American idiots advocating the stupidity that is killing off everyone who isn't as greedy as possible. If I can help one person realize analysis requires more thought than that then I am happy. There are greater interests exist in the world, and greater purposes for existence. Family, community, peace, humanity itself.