Category Archives: Bitcoin

Bitcoin will likely outperform stocks and bonds the rest of the year, according to the first major Wall Street strategist to issue a report on the digital currency.

"I think bitcoin is an underowned asset with potential for huge institutional sponsorship coming," Fundstrat co-founder Tom Lee said Wednesday on CNBC's "Fast Money."

"It has a lot of characteristics that are very similar to gold that I think will make it ultimately attractive as an alternate currency," he said. "It's a good store of value."

Here's Lee's outlook on bitcoin given on the show into year-end:

Gold or bitcoin? Bitcoin?

"Yes."

Would you rather own bitcoin versus a basket of U.S. stocks?

"Between now and year end it's easily bitcoin."

Will bitcoin be the best performing asset?

"Yes."

Bitcoin leaped to record highs this week above $3,500, more than tripling in value for the year despite a split in the currency last week into bitcoin and bitcoin cash, an alternative version supported by a minority of developers.

Bitcoin traded 1.5 percent higher near $3,428 Thursday morning, according to CoinDesk. Bitcoin cash steadied after wild swings in its first week, trading near $303, according to CoinMarketCap.

Another digital currency, ethereum, rose 1 percent to just under $300, according to CoinDesk.

Bitcoin three-month performance

Source: CoinDesk

Lee published a report in early July outlining the potential for bitcoin to rise above $20,000 and potentially reach $55,000 by 2022. Formerly the top stock strategist at JPMorgan and a perennial favorite of big institutional investors, Lee was also one of the few on Wall Street to predict that a Donald Trump win in last year's election would cause stocks to rally, not fall like most had seen.

Lee sees another reason for optimism about bitcoin.

"Institutions have to directly buy the coin today through a broker, but both the CBOE and the CFTC have opened up options futures trading, so I think it's going to grow in holdings," he told CNBC.

In the last month, the Chicago Board Options Exchange said it plans to offer bitcoin futures by early next year, while the U.S. Commodity Futures Trading Commission approved a digital currency trading firm called LedgerX to clear derivatives.

Market strategists have noted there are few highly attractive investment opportunities with U.S. stocks at all-time highs and bonds steady as the Federal Reserve remains on a gradual pace of monetary policy tightening and gold in a trading range.

The median S&P 500 target of strategists surveyed by CNBC is 2,475, just a point above where the stock index closed Wednesday. Lee happens to be the most bearish among those strategists with a year-end target of 2,275, or 8 percent below Wednesday's close.

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Top Wall Street strategist expects bitcoin to be the best asset through year-end - CNBC

Bitcoin has gone on bull runs before but nothing like this: Prices this week shot through the $3,500 mark as the mainstream media hailed digital currency as a new asset class. Then it got another boost as the blue chip brokerage house, Fidelity, allowed its customers to create bitcoin accounts.

Now, some people are calling for it go even higher. As Quartz reports , a Standpoint Research analyst has called a target of $5000 for bitcoin by 2018. This raises the question of whether ordinary investors should put a smidgen of their savings, or even their retirement accounts, into buying bitcoin. (Keep in mind you don't have to buy a whole bitcoin. Since it's digital, you can buy a hundred millionth of onethis tiny unit is called a Satoshi after bitcoin's creator.)

There are strong arguments to buyand also strong ones to stay the heck away. Here are three of each.

Major investors and the financial industry is taking it seriously

Since its creation in 2008, Bitcoin's biggest boosters have been computer geeks and libertarians. But recently, they've been joined by a growing number of mainstream investors and entrepreneurs who see bitcoinand other digital currenciesas a legitimate asset class such as stocks, bonds, or commodities.

In 2017 alone, famous names like Andreessen Horowitz and Sequoia Capital have bet on hedge funds that are investing hundreds of millions of dollars into digital currency funds. Meanwhile, the financial infrastructure to support bitcoin and other digital currency is maturing rapidly: Coinbase's GDAX exchange has supported margin trading since March, while the Commodity Future Trading Commission just gave the green light for firms to sell digital currency options and other derivatives.

There is only a limited amount of bitcoin

One reason to buy bitcoins are a valuable asset is that only 21 million of them will ever come into the worldand most of them are already here. As those familiar with bitcoin know, the number of coins created by the mining process drops by half every few years. Right now, around 80% of all bitcoins are already mined and no new ones will appear after the year 2040. This scarcity could continue to drive up demand, especially if (as has been rumored ), central banks decide to start buying them as foreign currency reserves.

Some see bitcoin as the new gold

So-called gold bugs like to own the precious metal because it is an asset whose value is not controlled by governments. Even if a country is ravaged by war or its profligate central bank prints too much money, the value of gold (unlike the national currency) will remain. Bitcoin has many of the same qualities. It exists on a decentralized computer network that transcends national borders, and there is no Federal Reserve-like authority that can devalue it.

This isn't a definitive reason to buy bitcoin any more than it is to buy gold. But an analyst cited by Quartz predicts the gold bugs will become bitcoin bugs instead, which means a lot of money flowing into the digital currency.

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Bitcoin's core users are still criminals and fringe figures

For years, stores like Overstock and Subway have accepted bitcoin as payment alongside cash and credit cards. But despite the promise of true believers that bitcoin could replace cash one day, there is no evidence this will happen. The reality is bitcoin is too slow compared to visa or debit cards, and transaction fees are rising. Right now, you can pay a fee and wait ten minutes for your bitcoin transaction to clearor swipe a credit card to pay instantly and get a cash reward.

Because of these limitations, bitcoin's core use remains what's it's always been: paying for drugs or extortion fees on the Internet. For instance, the cyber-criminals who launched a recent wave of " ransomware " attacks known as WannaCry asked for payment in bitcoin .

Ordinary consumers, meanwhile, are not using it as a payment method. That doesn't mean its not valuable as an investmentjust that, in the real world, it's even less useful than gold.

Bitcoin is extremely volatile

Over its nearly decade-long history, bitcoin has been prone to spectacular crashes. In 2013, for instance, the currency went on a run to over $1,100 only to tank to $700 a few months later, and then bottom out near $200 in early 2015. There is no reason this couldn't happen again.

While investors may drool at $5,000 bitcoin, they better be equally ready to kick themselves if it tumbles back to $2,000 or lower this year. This goes double for the many other so-called alt-currencies (other digital currencies some people buy as a proxy investment for bitcoin.)

Bitcoin only exists on computers

This may sound obvious but, as a form of money, bitcoin might be the most intangible stuff in history. Even paper money or securities can be presented to a central bank or company in the hopes someone will redeem them. No such possibility with bitcoin. Digital currency is just a piece of code out there on the Internet (or in special digital storage vaults to prevent hackers from stealing it), and there is no country or company you can ask to honor it.

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$5000 Bitcoin? 3 Reasons to Buyand to Stay Away - Fortune

Bitcoin has gotten a lot of fanfare lately, but not from Howard Marks, a legendary value investor on Wall Street.

Marks told CNBC's "Halftime Report" on Thursday that's because he doesn't understand what is the actual value of bitcoin.

"It's not a medium of exchange, it's a medium of trading, so I can't see any intrinsic value," Marks said. "I don't understand what's behind bitcoin."

"For me, there is only one kind of investing: When you look at something, you don't think, 'Is it going up or down tomorrow?' ... You say, 'What is the intrinsic value?' and then you say, 'Can I buy it for less?'" Marks added. "There is no intrinsic value in bitcoin."

Bitcoin has surged nearly 250 percent this year alone, prompting many to hop on the cryptocurrency's bandwagon.

Bitcoin in 2017

Source: Coindesk.com.

Fundstrat co-founder Tom Lee told CNBC's "Fast Money" on Wednesday he thinks the cryptocurrency will be the best-performing asset class through year-end. Investing legend Bill Miller reportedly owns bitcoin, and Josh Brown, CEO of Ritholtz Wealth Management, said last month he used Coinbase to buy bitcoin.

"Maybe I'm just too old and too much of a dinosaur to understand bitcoin," Marks said jokingly.

The co-chairman of Oaktree Capital is widely known for his investment memos, which predicted the financial crisis and the dot-com bubble implosion.

In a memo last month Marks compared cryptocurrencies with the Tulip mania of 1637, the South Sea bubble of 1720 and the internet bubble of 1999.

With reporting by Tae Kim.

Disclosure: Josh Brown is a CNBC contributor.

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Howard Marks, who has called past market bubbles, says 'I don't understand what's behind bitcoin' - CNBC

Two traders are unfazed by bitcoin's meteoric surge and say that between the cryptocurrency and gold, you're better off trading the yellow metal.

Bitcoin has jumped 240 percent this year to a high of $3,288 on Wednesday, while gold was trading at $1,280. But despite the bitcoin gains, Brian Stutland of Equity Armor Investments and Path Trading Partners' Bob Iaccino believe gold is still a better bet than bitcoin from technical and fundamental perspectives.

"When you look at gold over the past couple of months, [it has] tracked very well [relative] to the cryptocurrency," Stutland said Tuesday on CNBC's "Futures Now." "If you price adjust and volatility adjust, I think gold still has a little bit of catching up to do."

As for Iaccino, he believes that while bitcoin's popularity is indisputable, a takeover by another digital currency could be possible, leading him to believe that bitcoin is more unstable than many may think.

"Bitcoin, right now, is the most popular [cryptocurrency] and it is the most valuable one," he said. "But I don't see it as a store of value, because any [other cryptocurrency platform] could come out with a slightly better technology and completely replace bitcoin."

In order to catch up to all the action bitcoin is seeing, Stutland wants to buy gold at the $1,265 level, targeting a move up to $1,285 by December expiration with a stop at $1,250, a key support level that gold has held, according to the trader.

"The volatility is tremendous, so you're going to see wild swings in here and that is something to be aware of," he said.

Gold actually rose more than 1 percent on Wednesday off threats delivered by President Donald Trump and North Korea's Kim Jong Un to one another, the yellow metal being one of the biggest safety trades in times of possible turmoil. Bitcoin, on the other hand, dropped more than 3 percent Wednesday, reversing some of the cryptocurrency's gains from the week

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Bitcoin is almost triple the price of gold here's what traders think you should buy - CNBC

It is mainly the new "token" cryptocurrencies that are issued in ICOs with no regulatory oversight, which have exploded since the start of the year, that are causing the most anxiety.

One, the "Useless Ethereum Token", which appears to have been set up as a way of showing how worthless many of the ICOs really are, is nonetheless changing hands for 3 cents a unit. "No value, no security, and no product. Just me, spending your money," its website states.

"It's just so easy to raise money on an ICO right now, it just feels like there's a gold rush going on there," said Moffat. "Some of the new currencies - beyond bitcoin and Ethereum - could crash to zero."

By mid-July, about $1.1 billion had been raised in ICOs this year, roughly 10 times more than that in the whole of 2016, according to cryptocurrency research firm Smith + Crown.

The rapid ascent of ICOs prompted the U.S. Securities and Exchange Commission (SEC) to warn last month that some ICOs should be regulated like other securities.

This is new digital territory and how the rapidly proliferating cryptocurrency market will play out is anyone's guess.

While critics say the highly correlated nature of the currencies means the weakness of newer entrants could bring the whole house down; others argue market forces will ensure the best players prevail.

"Will some of these (currencies) go away? Of course," said Vias of Ripple.

"We're going to see Darwinism in real-time here. Only the strong will survive."

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Buoyant bitcoin stirs crypto-bubble fears - CNBC

Bitcoin saw a modest pullback from its recent record run on Wednesday, but the cryptocurrency enjoyed some upbeat news on the session, with Fidelity Investments announcing that it would start tracking the digital unit for its clients.

A single bitcoin was valued at $3,393.76, off by about 2.5%, based on levels from late Tuesday in New York, according to digital-currency research site Coindesk.com. The total market value for the most popular digital currency was at $55.4 billion, according to CoinMarketcap.com.

Boston-based money-management giant Fidelity Investments said it would, starting Wednesday, enable clients to monitor their digital-currency holdings via their accounts, in partnership with digital-wallet provider Coinbase.

This is an experiment in the spirit of learning what these crypto assets are like and how our customers may want to interact with them, Hadley Stern, senior vice president and managing director at Fidelity Labs, the companys innovation unit, told Reuters.

Fidelity CEO Abigail Johnson has been one of the biggest champions of bitcoin and its underlying blockchain among traditional financial-services companies. Digital-currency blockchains refer to the peer-to-peer digital network designed to transfer and track ownership of he currency.

Recognition by mature, Wall Street enterprises has appeared to both help support demand and reaffirm to some the growing legitimacy of virtual monetary units, even if they are not totally understood or used by average investors.

Bitcoin and its virtual ilk have drawn increased attention from businesses and regulators in recent months, which may also account for its record rally in 2017. Bitcoins value has surged by 250% since the start of the year, compared with a 10.5% year-to-date rise for the S&P 500 index SPX, -0.04% and a nearly 12% gain for the Dow Jones Industrial Average DJIA, -0.17%

Rising geopolitical tensions, headlined by North Korea threatening to launch a ballistic-missile attack against U.S. territory Guam, didnt appear to influence digital currency moves Wednesday.

Read: Guams governor: There is no threat but American island will be defended

Elsewhere in digital currencies, the ethereum networks ether token bought $299.77, up 6.7% from its levels late Tuesday in New York. Ethers total value was at about $28.2 billion.

Meanwhile, Bitcoin Cash was down about 7% at $308.79, compared with its late-Tuesday value. The new digital currency, which emerged out of the original bitcoin Aug. 1, is the result of a small faction of bitcoin developers demand for a version of the currency that allowed for so-called miners, who support the unit, to process transactions in larger increments. The currency is presently the fourth-largest cryptocurrency, with a value at $5 billion.

Also read: Meet Bitcoin Cash the new digital-currency that surged 122% in less than a day

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Bitcoin retreats from all-time high even as Fidelity debuts digital-currency tracking - MarketWatch

Currently, bitcoin transactions are validated through a process called mining, where powerful computers solve a complex math problem before the transaction is recorded on the blockchain. A whole confirmed transaction can take up to an hour.

The Lightning Network promises to reduce this process to seconds. It requires participants to agree to a transaction on a separate channel and then the blockchain will update their accounts accordingly. This can be done without the need for miners or third parties such as digital wallet providers.

The developers of Lightning say this means transactions can be instant, will allow for micropayments of bitcoin and enable a larger volume of transactions. It may even help bitcoin be used more on the high street.

"Lightning can be used at retail point-of-sale terminals, with user device-to-device transactions, or anywhere instant payments are needed," the developers said in a summary document.

Lightning will make bitcoin a long-term competitive payment platform and could revolutionize peer-to-peer payments, according to Gatecoin's Menant.

"Particularly with regards to micropayment transactions that may be useful for emerging markets with low-value local currencies," he said.

"It can also be implemented to facilitate machine to machine payments, using its smart contract framework, so that firms running various automated processes can benefit from direct payment relationships between its software and that of its clients or suppliers."

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As bitcoin comes off its record high, the next step is to avoid a 'lightning fork' - CNBC

There aretwo bitcoins now?

It's safe to sayuncertainty cast a pall over the cryptocurrency markets last week when on August 1, a group of developers and miners split the blockchain and created a new cryptocurrency.

It was the first (high-profile) bitcoin fork to date, and in response, the price very well could have entered a period of unprecedented churn. With bitcoin and bitcoin cash competing, it wasn't hard to foresee this creating market dislocations and downward pressure on price.

What happened, however, was the opposite, as in the last few days markets have surged past all-time highs. In fact, analysts have indicated a major upswell in confidence and a broad consensus that the upward march of bitcoin's price could continue.

Brad Chun, CEO of blockchain startup Mooti Digital Identity, went so far as to argue that institutional money is likelyto pour into bitcoin as a result.

Chun told CoinDesk:

"For early tech adopters who can't fathom a market cap of over $50 billion or $100 billion for bitcoin, they haven't seen anything yet. While we might see profit taking short-term, I view any dips as buying opportunities."

Chun, who plans to hold bitcoin through the remainder of 2017, has a $5,000 end-of-year price target on bitcoin, a price figure that includes bitcoin cash and any other potential "fork currencies" created as a result of disagreements over the network's future.

Kevin Zhou, of the cryptocurrency fund Galois Capital, is also bullish on the price of bitcoin, particularly after Segregated Witness locked in on the main bitcoin blockchain yesterday and the split went by without incident.

Zhou said bitcoin could see price gains of 200 to 300 percent year-over-year, for the next two years. And added that $3,000 to $4,500 "seems reasonable" as a price target for the year, though he hedges a bit on that range.

Harry Yeh, managing partner at Binary Financial, is more categorical now that the hard fork has passed.

"Expect a big move past $3,500 possibly this week," he told CoinDesk. Yeh believes $4,000 "is on the horizon" for bitcoin by the end of the year.

But perhaps the most prevailing view in the wake of the bitcoin cash fork is that a major headwind has just come off the table.

The argument goes like this: bitcoin survived a fork without a major technical or price catastrophe. As a consequence, the market has stabilized, clearing the way for higher prices in the future.

Yehexplained:

"Traders trade based on technical and fundamental analysis. With the hard fork issue gone and the technicals being very bullish again, long term there is definitely a lot more confidence amongst traders."

Once again, confidence has risen because the downside risks weren't realized.

Tellingly, and in keeping with this thesis, Yeh points out that this is only the case until "the next" fork arises to darken markets.

Here, Zhou's comments reflect how forks can be both positive and negative factors in the market. While forks can create uncertainty and risk, he noted forks also have an upside the ability to spawn new assets.

"I also think after the success of bitcoin cash forking off bitcion, we might see a lot of other forks happening. 2014 was altcoin mania; 2015-2016 was blockchain mania; 2017 is ICO mania; maybe 2018 will be fork mania," he said.

Elsewhere, Petar Zivkovski, director of operations at Whaleclub, struck a more nuanced note on price direction and short-term price targets.

"2017 has been a stellar year for bitcoin. Barring a black swan event (this is a big assumption in the industry), I think the bull run will continue through the end of the year since it's the predominant trend," he remarked.

While Zivkovski has admitted that the price could see a short-term pullback, he said he is watching out for whether the $3,000 price will hold. If it does, he said $4,000 might not be far off.

Interestingly, Zivkovski struck a novel note that none of the other analysts picked up on: The possibility that soaring bitcoin prices could cause a negative feedback loop for the price of bitcoin.

In a nutshell, his thesis is that the "incredible price rise" in bitcoin is attracting the attention of both governments and regulators on a global basis. As a consequence, "a wider crackdown on bitcoin exchanges," he said, could mitigate price gains.

In other words, bitcoin could become a victim of its own success.

Fork art image via Shutterstock

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Bring on the Forks: Bitcoin Traders See Improving Price Outlook for 2017 - CoinDesk

Bitcoin is either an enormous bubble or has a lot further to run. Financial forecasters are weighing in on the cryptocurrency, trying to divine where bitcoins price is headed, now that it sits at around $3,400, up from around $600 a year ago.

Here are the arguments for bitcoin hitting $5,000or higher.

Ronnie Moas of Standpoint Research has a target of $5,000 for bitcoin by 2018, or in five months time. He published his call in a 122-page report at the end of July, which you can get via the Standpoint website or if you contact him on Twitter.

His rationale is that a fraction of the worlds $200 trillion in stocks, bonds, gold, and cash will eventually make its way into bitcoin and other cryptocurrencies over the next 10 years. Moas thinks cryptos will be used as a payment system in emerging economies, and a store of value elsewhere. Cryptocurrencies then establish themselves as an asset class that mainstream investment advisers pitch to clients, he says. This scenario takes bitcoins market value from $56 billion today to $1 trillion. Overall, he believes cryptocurrencies will reach $2 trillion in market valueand thats his conservative estimate.

It would not shock me to see cryptocurrencies go to 4% of global investment assets, Moas says. Before anyone laughs at me for suggesting that something like that could happenjust look at what happened [in bitcoin] in the last five years. People who put in $10,000 made $1 million already. It happened already and I think it will happen one more time. We are in the 15th minute of a 90-minute soccer gameand it could go to overtime.

Both bitcoin and gold are scarce commodities with a finite supply, notes Tom Lee of Fundstrat. Both, arguably, have no particular utility beyond the value ascribed to them by the markets.

In July, Lee published a report setting out the case for valuing bitcoin as a gold substitute, according to CNBC. His methodology implies bitcoins price will reach $20,000 to $55,000 in five years, representing a 12 to 43-fold increase from todays price. The value of all the worlds gold is around $7.6 trillion at current prices, or around 130 times the size of the bitcoin market. As bitcoins market value rises, Lee reckons central banks will start buying it, pushing the price up further and accelerating the substitution of gold, he told CNBC.

Goldman Sachs technical analyst Sheba Jafari sees bitcoin potentially hitting $3,915, or about 15% above current prices. Jafari has identified four waves of bitcoin price rises over the past several years, and believes that a fifth is coming, eventually: It just might take time to get there.

Saxo Banks Kay-Van Petersen argues that a Trump administration spending spree could send US growth and inflation soaring, forcing the Federal Reserve to hike interest rates aggressively. Emerging markets, especially China, will then look for alternative asset classes not so beholden to central bank-controlled monetary policies. Enter bitcoin. Petersen predicted last year that bitcoin would hit $2,000 based on those factors this year. That target was achieved, but not quite for the reasons he spelled out.

In May, he set out a 10-year forecast for bitcoin hitting a whopping $100,000, based on cryptocurrencies capturing 10% of all currency trading volume within a decade. Bitcoin would account for about a third of that, or some $175 billion traded daily. If the daily traded volume is typically 10% of bitcoins total market capitalization, that values bitcoin at $1.75 trillion, he told CNBC.

Correction: An earlier version of this article misstated Ronnie Moass prediction of bitcoins market value.

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The case for $5000 bitcoin - Quartz

At Tuesday's price, the digital currency has more than tripled for the year, versus gold's nearly 10 percent rise.

"I think bitcoin is going to have increasing institutional sponsorship given the pending trading of bitcoin options and bitcoin futures," Fundstrat said.

Both derivatives products are expected to launch later this year or in early 2018.

That said, gold is far from disappearing as a store of value.

Lee pointed out that the overall size of the gold market at about $7.5 trillion dwarfs that of bitcoin. At Tuesday's prices, bitcoin had a market capitalization of roughly $57 billion, around the size of Charles Schwab.

In that case, Lee and other analysts have noted that even a small percentage of fund flows out of gold into bitcoin could send the digital currency's price sharply higher, potentially into the tens of thousands of dollars in the next few years.

Other digital currencies also rose Tuesday. The one-week-old bitcoin offshoot "bitcoin cash" rebounded from weekend lows near $200 to trade near $338.25, according to CoinMarketCap.

Ethereum traded nearly 5 percent higher at $280, about 12 percent higher for the month, according to CoinDesk.

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Bitcoin climbs to record, nearly three times the price of gold - CNBC