jueves, 23 de noviembre de 2017

jueves, noviembre 23, 2017

If There Is a Bubble, It’s in Bitcoin

The cryptocurrency has gone berserk this year and has all the elements of extreme optimism

By Aaron Back

Blockchain has the potential to change how commerce is conducted. But, just like during the dot com bubble, that doesn’t make all or even most of today’s blockchain players smart investments. Photo: Michal Fludra/Zuma Press 


If the markets are at a top, bitcoin has scaled the highest peak.

Past episodes of market euphoria have often been marked by extreme optimism over new technologies. In the 1920s it was automobiles and radio. In the late 1990s it was the internet.

Today the innovations fueling investor dreams include video streaming and electric cars. But none has inspired as much zeal as blockchain, the distributed ledger technology underpinning bitcoin and other digital currencies.

How many U.S. dollars one bitcoin buys


As in those previous market bubbles, the underlying technological revolution is real.

Blockchain has the potential to change how commerce is conducted by cutting out financial intermediaries. But, just like during the dot com bubble, that doesn’t make all or even most of today’s blockchain players smart investments.

Bitcoin itself has risen more than 700% this year, powering through multiple sharp corrections.

The currency is still seldom used to buy actual goods or services, making it for now almost entirely a vehicle for speculation.

The current investing nirvana is under attack as central banks scale back stimulus in a world filled with money. Heard on the Street walks through the risks and likely scenarios for markets in the coming months.

Even more worrying has been the wave of initial coin offerings, in which start-up companies issue new digital currencies to investors. There have been more than 160 coin offerings this year, collectively raising more than $3 billion, according to research firm Coindesk. Deals have garnered endorsements from celebrities such as Paris Hilton and Floyd Mayweather.

The coins typically work like tokens exchangeable for the startup’s future goods or services, but in some cases the offering firms give little or no information as to how they will use the proceeds or what the coins will be good for. This sparked a recent warning from Securities and Exchange Commission Chairman Jay Clayton that many offerings are susceptible to manipulation or fraud.

Schemes to lure credulous investors also tend to proliferate near market tops. Investors should proceed with caution.

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