On the move today so was going to pass on the blog entirely but in the event we felt that we just had to make sure that you'd clocked what's going on with Bitcoin, especially as we had made a rare foray into cryptocurrency territory last week.
Just briefly, Bitcoin traded as high as $9,747 this morning. If you take Friday's close at somewhere around $8,264, that's a rise of well over 17% over the weekend. Crazy stuff ..... Japanese exchanges have been inundated by speculative buyers apparently. Why ? Well, for a start "bandwagon" events like this create their own momentum, for a while at least. But there are some fundamental reasons behind the move. We use the word "fundamental" cautiously, mind you ..... we're not really sure what fundamental means when it's applied to something as ethereal as Bitcoin. But the initial surge occurred after news emerged that Coinbase, one of the largest platforms for trading cryptocurrencies, had tripled the number of its account holders to 13 million over the past year.
Furthermore, despite the high-profile sceptics such as Jamie Dimon of JP Morgan and Ray Dalio of Bridgewater, there is evidence (mostly anecdotal at this stage) that even household-name institutions are deciding on whether they can afford to ignore this phenomenon any longer. According to some, a break through the psychologically important $10,000 barrier will only further encourage them to do so. Wow, they're even talking about it like it's a regular currency or commodity now, and that's good news for Bitcoin enthusiasts too. Anything that legitimises cryptocurrencies and which brings them more into the mainstream (such as the involvement of institutions), is bound to be considered bullish.
What we're witnessing right now is the proverbial runaway train. Even for the die-hard bulls, 6-month and 1-year targets are being met in days. 25% reversals are being recovered almost as though they never happened. Only a fool would stand in front of this runaway train -- another old market cliche but admirable advice. But climbing aboard is plainly fraught with danger ..... for many, buying something that in percentage terms has achieved in two weeks what it it took the S&P 500 45 months to do, and which currently shows a 10-day volatility of 90, will not fit the desired risk profile of their portfolio, not by a million miles.
Very possibly, the bubble has still got a long way to go before it bursts ..... if it ever does, of course. These levels which already seem stratospheric might turn out to still be cheap ..... yes, really. But many who've missed the bus so far (what ? We thought it was a train ?) are not likely to change their minds at these vertigo-inducing valuations. For them, a watching brief will be the order of the day even if it means foregoing a possible jackpot ..... and frankly, who could blame them ?
Just in case, keep an eye open this week for :
US TAX PACKAGE : Senate Republicans will try to get their version of the tax deal passed, perhaps as early as Thursday. If successful, the administration's hope is that they will soon agree a hybrid package with the House of Representatives (whose own version is already passed) with a view to getting the thing done by year-end.
GERMANY : Markets are seemingly untroubled, but the political impasse will eventually weigh on things. The rumour is that the Social Democrats may be open to a renewal of the "Grand Coalition" after all, despite the slightly awkward fact that their leader Martin Schultz had categorically ruled it out.
OPEC : The next Vienna meeting starts on Wednesday ..... what will they say about an extension to production cuts ? And what will they say about what their reaction might be to a further jump in US shale production if OPEC and their colleagues outside the cartel (particularly Russia) do decide on an extension ?