Digital currencies such as bitcoin and ethereum have blown traditional investments out of the water since the year began. Bitcoin, which is the largest cryptocurrency by market cap, is up 373% year to date through Aug. 30, while ethereum, the second largest digital currency by market cap, has surged an almost unimaginable 4,737% year to date. For comparison, it’s taken the S&P 500 more than four decades to return what ethereum has in a matter of eight months.
But the real story is just how much money has been poured into cryptocurrencies over the past eight months. Since the year began, the aggregate market cap of all cryptocurrencies has jumped from $17.7 billion to a record $161 billion as of Aug. 29 — that’s an 810% climb.Bitcoin, the kingpin of the group, and its recently spun-off bitcoin cash, are pretty much responsible for around half of those market-cap gains.
Image source: Getty Images.
What on Earth has the investment world going so crazy for digital currencies? Fundamentally, it has a lot do with the underlying blockchain technology that many of the largest market-cap cryptocurrencies use. Blockchain is a decentralized digital ledger that securely records transactions. Some pundits believe it could represent the future of peer-to-peer or business-to-business transactions. In fact, more than 150 organization, including some well-known businesses, are currently testing ethereum’s blockchain on a pilot or small-scale basis.Ethereum appears best suited to appeal to big business, but the SegWit2X upgrade at bitcoin (bitcoin recently split into two currencies, bitcoin and bitcoin cash) should allow for faster processing times, lowering transaction fees, and greater capacity, which should appeal to enterprises.
Some investors simply like the idea of cryptocurrencies as a means of getting around traditional central bank-backed currency. In effect, bitcoin and other digital currencies act as a dream currency for libertarians. Quite a few well-known businesses also currently accept bitcoin to some capacity, adding validity that digital currencies may be here to stay.
We also can’t overlook momentum. Since most financial institutions have been kept on the sidelines, this run higher in cryptocurrencies is almost entirely due to the expectations of retail investors. As long as someone is willing to pay more, emotions and lofty expectations could drive bitcoin, ethereum, and its peers, higher.
Image source: Getty Images.
Finally, look to the weakening U.S. dollar as a reason digital currencies are so strong. A weaker dollar is great for U.S. exports, but it’s not so good for the American consumer or investor. Investors looking to maintain or grow their wealth may opt to move their money out of dollars and into a safe-haven commodity. Traditionally, gold has been this safe haven, but bitcoin and other cryptocurrencies have filled this role more recently. Gold is truly a finite commodity, but bitcoin’s protocol also limits the number of coins that can be mined, giving it a “finite” feel as well.
Though these digital currencies have returned mouthwatering gains for investors, there’s also the genuine possibility that this is a bubble just waiting to burst.
While arbitrary, this writer has seen an overwhelming number of cryptocurrency advertisements both online and in print suggesting that people invest in bitcoin. Generally, when we see an influx of ads surrounding a rapidly appreciating investment, it’s often emblematic of a bubble. Some of the fastest appreciating investments, including marijuana stocks, have had their valuations crater not too long after the calls to “invest in marijuana stocks” ramped up over the past couple of years.
Second, there’s not much in the way of “fundamental” data for investors to dig into to determine a fair valuation for cryptocurrencies. Without any government backing, there’s virtually nothing to tether the movement of digital currencies to other than the short-term emotions of investors. Blockchain technology is still too new to really get a bead on its usefulness for enterprises, meaning today’s cryptocurrency valuations may make little sense.
Image source: Getty Images.
There’s also clear evidence of overvaluation apparent in bitcoin-based equities that stock market investors can buy. For example, the Bitcoin Investment Trust (NASDAQOTH:GBTC) owns 173,014 bitcoin, which are valued at $4,577 as of Aug. 30. On an aggregate basis, this means Bitcoin Investment Trust owns $791.9 million worth of bitcoin. However, the market cap of the ETF run by Grayscale was $1.55 billion by 3 p.m. ET on Aug 30. That’s a 96% premium to what’s actually owned within the ETF. This premium makes no sense whatsoever!
Just as maddening, First Bitcoin Capital Corp. (NASDAQOTH:BITCF), which recently had its stock temporarily halted by the Securities and Exchange Commission for two weeks, is up over 24,000% over the trailing-12-month period. The company, which describes itself as developing cryptocurrencies, blockchain technology, and operating cryptocurrency exchanges, has virtually no assets, other than a mineral deposit in Venezuela from when it focused on being a gold mining company, and it generated a meager $46,236 in revenue in all of fiscal 2016. Yet First Bitcoin Capital has a market cap of $540 million. Wrap your hands around that.
I would strongly encourage investors who are seeking safe-haven assets to consider buying gold or silver to protect against a further decline in the dollar. Gold has a long history of being used as a viable currency, and it has a variety industrial and commercial uses. The same cannot be said for bitcoin, ethereum, or any digital currency.
Here is the original post:
The Aggregate Cryptocurrency Market Cap Is Up 810% Year to Date – Motley Fool
- Introduction to Cryptocurrency - CryptoCurrency Facts - October 14th, 2017
- Cryptocurrency Flash Crash Is Said to Draw Scrutiny From CFTC ... - October 7th, 2017
- Cryptocurrency Alternatives to Bitcoin - due.com - October 7th, 2017
- Learn BitCoin and master the world of cryptocurrency - October 7th, 2017
- Almost Every Cryptocurrency Is Tanking Right Now | Time.com - September 7th, 2017
- Cryptocurrency boom stalls as regulators focus on ICOs ... - September 7th, 2017
- Why Marketers Need to Pay Attention to Cryptocurrency -- Now - Entrepreneur - September 7th, 2017
- Opinion: That Floyd Mayweather-backed cryptocurrency is another sign of a bursting bubble - MarketWatch - September 7th, 2017
- Putin-Backed Political Group Advances 'Green' Cryptocurrency Concept - CoinDesk - September 7th, 2017
- First He Beat Up His Girlfriend, Now He's Selling Cryptocurrency With Paris Hilton - Daily Beast - September 7th, 2017
- Cryptocurrencies have already recovered from last weekend's crash ... - TechCrunch - September 7th, 2017
- Venezuela Cracks Down On Cryptocurrency Mining - CryptoCoinsNews - September 4th, 2017
- Mobius Foresees Cryptocurrency Crackdown Sparking a Rush to Gold - Bloomberg - September 4th, 2017
- How to make upwards of $1,000 a month by mining cryptocurrency - Mashable - September 2nd, 2017
- Chinese Officials Contemplate Suspending Cryptocurrency ICOs - The Merkle - September 2nd, 2017
- Cryptocurrency Investment Course 2017: Fund your ... - Udemy - September 2nd, 2017
- Six Banking Giants Just Decided to Partner to Create a New Cryptocurrency - Futurism - September 2nd, 2017
- 7 Cryptocurrency Predictions From the Experts - fortune.com - September 2nd, 2017
- Russia Could Pass Cryptocurrency Law This Year, Senior Lawmaker Says - CoinDesk - September 2nd, 2017
- AxionV: AI Cryptocurrency Fund Leading the Way in ICO Security - HuffPost - September 2nd, 2017
- PayThink Custom tokens are the future of cryptocurrency - PaymentsSource - September 1st, 2017
- Litecoin Prices Surge Above $70 as Crypto Market Tops $175 Billion - CoinDesk - September 1st, 2017
- Dharma wants to let anyone borrow a small amount of cryptocurrency - TechCrunch - September 1st, 2017
- PR: Archain Is Building an Uncensorable Internet Archive Inside a Cryptocurrency - Bitcoin News (press release) - August 31st, 2017
- Cryptocurrency Market Just Reached Total Value of $160 Billion - Futurism - August 31st, 2017
- Another banking trojan is trying to loot your cryptocurrency wallets - The Register - August 31st, 2017
- Cointal Revolutionizes P2P Cryptocurrency Trading - CryptoCoinsNews - August 31st, 2017
- $160 Billion: Cryptocurrency Market Sets New All-Time High ... - CoinDesk - August 30th, 2017
- Central Banks Can't Ignore the Cryptocurrency Boom - Bloomberg - August 30th, 2017
- Whoppercoin is a cryptocurrency you can eat or trade - The Verge - August 30th, 2017
- Learn about cryptocurrency mining with this interactive blockchain demo - TNW - August 30th, 2017
- Good Morning, Cryptocurrency! Vietnam To Create Legal Framework For Digital Assets - ETHNews - August 26th, 2017
- Cryptocurrency mining may void warranty on Inno3D GPUs - PC Gamer - August 26th, 2017
- Russian Deputy PM Says He Supports a State-Backed Cryptocurrency - CoinDesk - August 25th, 2017
- How to Learn About Cryptocurrency In The Bitcoin Era - Daily Beast - August 25th, 2017
- Bernanke to Give Keynote Speech at October Cryptocurrency Event - Bloomberg - August 25th, 2017
- Estonia wants to launch its own government-backed cryptocurrency called 'estcoin' - CNBC - August 25th, 2017
- Aimwise to Create Standards for Cryptocurrency Crowdsales - newsBTC - August 25th, 2017
- A Mysterious New Cryptocurrency Is Surging After Being ... - August 25th, 2017
- Cryptocurrency Cyber Crime Has Cost Victims Millions This Year - Bloomberg - August 25th, 2017
- This European country may hold an ICO and issue its own ... - TechCrunch - August 23rd, 2017
- Bitcoin Skeptic Mark Cuban to Invest in Cryptocurrency ... - August 23rd, 2017
- $150 Billion: Total Cryptocurrency Market Cap Hits New All-Time ... - CoinDesk - August 23rd, 2017
- Cryptocurrency Market cap Sets a New All-time High of Over $150bn - newsBTC - August 23rd, 2017
- South Africa's Central Bank: It's 'Too Risky' to Launch a Cryptocurrency - CoinDesk - August 23rd, 2017
- Mark Cuban backs new $20 million cryptocurrency venture fund - CNBC - August 22nd, 2017
- VR World Decentraland Raises $25.5 Million In Cryptocurrency - UploadVR - August 21st, 2017
- AMD Releases Beta Graphics Driver for Better Cryptocurrency Mining - Bitcoin Magazine - August 21st, 2017
- Philippines Central Bank Grants First Cryptocurrency Exchange Licenses - CoinDesk - August 21st, 2017
- Media A-Listers Back eSports Betting Firm As It Dives Into Cryptocurrencies - Deadline - August 20th, 2017
- 10 Reasons Why Central Banks Will Miss the Cryptocurrency Renaissance - CoinDesk - August 20th, 2017
- Australia Weighs Jail Time for Cryptocurrency Exchange Offenders - CoinDesk - August 20th, 2017
- Cryptocurrency wallet Exodus adds OmiseGo in latest update - CryptoNinjas - August 20th, 2017
- SEC Statements Spur ShapeShift to Review Cryptocurrency Listings - CoinDesk - August 20th, 2017
- Australian money cops gain powers to regulate cryptocurrency - The Register - August 18th, 2017
- Could Cryptocurrencies Replace Cash? - Investopedia - August 18th, 2017
- NVIDIA CEO Believes Cryptocurrencies Have Longevity - Investopedia - August 18th, 2017
- Substratum Launches Substrate Cryptocurrency to Power the New Decentralized Web - The Merkle - August 18th, 2017
- More Evidence that Cryptocurrencies Are a Bubble? - Investopedia - August 16th, 2017
- Cryptocurrency Exchange ShapeShift Acquires Bitcoin Wallet Startup - CoinDesk - August 16th, 2017
- Canada Approves First Cryptocurrency Sale in Property Rights Shake-Up - Voice of America - August 16th, 2017
- From UFC To Fighting Fake News With Cryptocurrency - SportTechie - August 16th, 2017
- Will the Bitcoin Fork Continue to Boost the Cryptocurrency's Value? - TheStreet.com - August 16th, 2017
- 'Father of Financial Futures' Seeks Cryptocurrency Hardware Patent - CoinDesk - August 14th, 2017
- How Exactly Do You Get Rich Off The Hot New Cryptocurrency? - Gizmodo Australia - August 14th, 2017
- Ripple Price Forecast: Factors Suggest XRP Cryptocurrency ... - August 13th, 2017
- US Foreign Sanctions Bill Mandates That Governments Monitor Cryptocurrency - Bitcoin News (press release) - August 13th, 2017
- What Would Happen if Cryptocurrency Became More Popular Than Cash? - Futurism - August 13th, 2017
- $126 Billion: The Cryptocurrency Market Just Set a New All-Time High - CoinDesk - August 12th, 2017
- Ukraine's Central Bank Moves Closer to Cryptocurrency Regulation - CoinDesk - August 12th, 2017
- Nvidia shares fall on data center revenue but chips ride cryptocurrency boom - Reuters - August 12th, 2017
- For Cryptocurrencies, the Future is Now - Daily Reckoning - August 11th, 2017
- Nvidia more bullish on cryptocurrency than AMD - MarketWatch - August 11th, 2017
- Coinbase Becomes First Bitcoin 'Unicorn' - Fortune - August 11th, 2017
- Buoyant Bitcoin stirs fears of a crypto-currency bubble bursting - The Independent - August 10th, 2017
- At last, a kosher cryptocurrency: BitCoen - The Register - August 10th, 2017
- Bitstamp Will Add Ether Trading to Cryptocurrency Exchange ... - CoinDesk - August 10th, 2017
- Cryptocurrency Investment Fund Completes $1.8 Million ICO ... - CoinDesk - August 10th, 2017
- Russian social network VKontakte allows cryptocurrency advertising - FinanceFeeds (blog) - August 10th, 2017
- Russian launches world's first Jewish cryptocurrency | The Times of ... - The Times of Israel - August 10th, 2017