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
- ATB Coin - The fastest and most secure payment system - June 19th, 2018
- An Illustrated Glossary of Cryptocurrency Slang (Infographic) - June 19th, 2018
- Apollo All-in-One Cryptocurrency - June 3rd, 2018
- Cryptocurrency News, ICO Database, Coin Rankings and ... - May 25th, 2018
- CoinLib - Cryptocurrency prices now - May 21st, 2018
- Cryptocurrency Market Capitalizations | CoinMarketCap - May 4th, 2018
- CryptoCurrency Market , Coin Prices & Charts, Crypto ... - April 28th, 2018
- Nasdaq open to cryptocurrency exchange in future, says CEO - April 27th, 2018
- The 4 Top Cryptocurrency Mining Stocks -- The Motley Fool - April 27th, 2018
- One in five financial institutions consider cryptocurrency ... - April 27th, 2018
- New hacks siphon private cryptocurrency keys from ... - April 27th, 2018
- What Is Cryptocurrency? - dummies - April 21st, 2018
- Cryptocurrency Market Surges to $365 Billion, Start of a ... - April 21st, 2018
- BTCMANAGER | Bitcoin, Blockchain & Cryptocurrency News - April 16th, 2018
- How to keep your cryptocurrency safe - CNET - April 11th, 2018
- How do I report Cryptocurrency Mining income? - TurboTax ... - April 4th, 2018
- When do you report Cryptocurrency investments? - TurboTax ... - April 4th, 2018
- Trading Cryptocurrency in 2018: The Definitive Guide - March 14th, 2018
- How would one operate a Cryptocurrency Mining Pool and ... - March 13th, 2018
- Coinbase cryptocurrency index fund - Business Insider - March 10th, 2018
- Cryptosomniac | Cryptocurrency Price Tracker - Bitcoin & Eth ... - February 24th, 2018
- Cryptocurrencies News & Prices | Markets Insider - February 22nd, 2018
- I started cryptocurrency mining at the end of 2017 and was ... - February 20th, 2018
- Cryptocurrency News - Bitcoin, Ethereum, NEO, ICO startups - February 8th, 2018
- 7 Best Cryptocurrency Exchanges to Buy/Sell Any ... - February 8th, 2018
- Electroneum. The Mobile Cryptocurrency. - February 8th, 2018
- Cryptocurrencies trading | your guide in the world of trading ... - February 5th, 2018
- Robinhood trading app introduces cryptocurrency - money.cnn.com - January 28th, 2018
- Robinhood adds zero-fee cryptocurrency trading and tracking ... - January 28th, 2018
- Cryptocurrency Price Prediction, Comparison, Analysis - January 22nd, 2018
- South Korea's major cryptocurrency exchanges ... - reuters.com - January 13th, 2018
- Bitcoin-crazy South Korea may face a ban on cryptocurrency ... - January 13th, 2018
- Cryptocurrency - IC Markets - January 13th, 2018
- Kodak launches cryptocurrency, stock pops 125% - Jan. 9, 2018 - January 10th, 2018
- The cryptocurrency bubble is strangling innovation | TechCrunch - January 9th, 2018
- Coinschedule - The best cryptocurrency ICOs (Initial Coin ... - January 8th, 2018
- CCN: Bitcoin, Ethereum, ICO, Blockchain & Cryptocurrency News - January 7th, 2018
- Cryptocurrency boom: Why everyone is talking about ripple - January 4th, 2018
- Cryptocurrency stocks holding gains despite bitcoin pullback ... - December 29th, 2017
- MobileCoin: A New Cryptocurrency From Signal Creator Moxie ... - December 16th, 2017
- Cryptocurrency Definition | Investopedia - December 6th, 2017
- '$300m in cryptocurrency' accidentally lost forever due to bug ... - November 10th, 2017
- Amazon might want in on cryptocurrency - mashable.com - November 8th, 2017
- What is Cryptocurrency - earnlite.com - October 26th, 2017
- Cryptojacking Lets Strangers Mine Cryptocurrency With Your ... - October 21st, 2017
- 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