I wanted dislike the new that Kodak has pivoted towards crypto. The news sent the stock up over 200% at the time of this writing. I’ve mentioned other examples earlier which seem ridiculous. The ridiculousness is not necessarily in companies trying to get into crypto – its the reaction in stock prices (disclosure – I may be long or short KODK). In this instance Kodak seems to have a plan to develop its own currency and mining equipment. Kodaks a tech company and (should) have the resources to get this together. (As opposed to Rich’s cigars).
Lets be honest though – to me this stock has no business being up over 200% on this news. There is major risk to this venture for a myriad of reasons. And in my mind this is actually one of the better crypto-related ideas I’ve seen from a listed company. Sure Kodak could succeed and return to glory with this business plan. But we’re along way from some speculative tech and major profit. Much like cryptos with no intrinsic or extrinsic values the price shoots up through the roof just on the idea that new buyers will come in and push up the prices.
This isn’t investing, its gambling – at best speculation.
Disclaimer: This is just rampant speculation. I own crypto.
A thought struck me today as the crypto market has been fairly quiet the last few days compared to the mayhem a week ago. Many crypto currencies like Litecoin and Ethereum were up 50-100% last week, only to trim gains this week. CBOE Bitcoin futures didn’t appear to have much impact on price at all in the first week of trading either. In hindsight its clear to see that the market needed to cool, but I have a feeling that the “cooling” might be over for a bit.
I dont think that price is down because demand is down. I suspect what we saw was the first “wave” of another to come. Why is it “to come” and not “here”? People can’t get in fast enough. Exchanges are overwhelmed with new signups.
Lets Face It, This is A Bitcoin Litecoin Ethereum Bubble
Coinbase is the #1 App on the Apple App Store and your Barber/Grocery Clerk/Grandmother are all buying in. Prices have surged unbelievable amounts in the past few days (let alone year). My hunch is that most people buying in now are trying to get rich and are not trying to escape the grasp of the evil Wall Street empire.
Keep in mind, just because there is a price bubble doesn’t mean the technology isn’t awesome. The prices of Bitcoin or Litecoin could go down 90% and the tech would be just as mind blowing.
Its also possible I’m wrong and that prices just keep going up. Many point to this chart showing internet adoption:
The key to all these tech was ADOPTION – people used them. This chart is also talking about ADOPTION and not PRICE. These are two different things, but brings me to a point:
People drawn in by trying to get rich might just stick around and ADOPT crypto tech.
Clearly millions of people are flooding into the crypto space, and if they don’t SELL but start to transact with each other using Bitcoin or Litecoin – then prices might not come back down.
The reviews claim that buying Bitcoin on the app is very easy and intuitive. People also trust Square.
All these people speculating on Bitcoin price could suddenly find themselves transacting quickly and easily using Bitcoin. They could adopt it. That might keep prices up, or even be a catalyst for higher prices.
In the end we’re in the first or second inning of all this tech. Prices will do what they will but its clear that crypto is here to stay.
This is pure speculation. Don’t trade off of my opinion. Its a quick thought.
When thinking about the “bitcoin bubble” that so many are wanting to call I was theorizing at what price might you say: “This is a bubble”. Throughout history there have been countless bubbles: real estate, tech stocks, beanie babies. The thing about all of these bubbles is that they were fairly localized. Meaning these were bubbles that had high barriers to entry. Someone in India would have a hard time speculating on San Francisco real estate prices. A guy with $10 in Uruguay probably couldn’t open a brokerage account and buy internet stocks.
But, here is the thing:
All people, virtually anywhere can buy Bitcoin. If you have access to an internet connection, you can get in. Heck, with Bitcoin ATM’s maybe you don’t even need that. Governments globally are talking about how to handle Bitcoin and cryptocurrency. I can’t recall of a time when every government in the world was talking about bond or stock prices.
I think this is the first time in history that the entire world can all speculate on the exact same asset. Currently, there is very little barrier to entry. There are no storage fees, minimum purchase levels or geographic restrictions.
When you start to think about that it becomes difficult to process. You can argue that the current price is in “bubble” territory. That does not mean the price can’t continue to rise.
Who knows, maybe this is just the start. The point is I don’t think the world has ever seen anything like this before. Hopefully it ends well.
Governments will let the private sector develop the technology and then usurp it for their own use
Its not easy for alt-coins to beat Bitcoins lead in credibility and scale
People continue to say that Bitcoins value is in its anonymity – its not really anonymous. The IRS uses software to track people using it now. You can’t discount the value of speed and also owning your own money. This means not having to rely on a bank.
Is the cryptocurrency bitcoin the biggest bubble in the world today, or a great investment bet on the cutting edge of new-age financial technology? My best guess is that in the long run, the technology will thrive, but that the price of bitcoin will collapse.
If you haven’t been following the bitcoin story, its price is up 600% over the past 12 months, and 1,600% in the past 24 months. At over $4,200 (as of 5 October), a single unit of the virtual currency is now worth more than three times an ounce of gold. Some bitcoin evangelists see it going far higher in the next few years.
What happens from here will depend a lot on how governments react. Will they tolerate anonymous payment systems that facilitate tax evasion and crime? Will they create digital currencies of their own? Another key question is how successfully bitcoin’s numerous “alt-coin” competitors can penetrate the market.
In principle, it is supremely easy to clone or improve on bitcoin’s technology. What is not so easy is to duplicate bitcoin’s established lead in credibility and the large ecosystem of applications that have built up around it.
For now, the regulatory environment remains a free-for-all. China’s government, concerned about the use of bitcoin in capital flight and tax evasion, has recently banned bitcoin exchanges. Japan, on the other hand, has enshrined bitcoin as legal tender, in an apparent bid to become the global centre of fintech.
The United States is taking tentative steps to follow Japan in regulating fintech, though the endgame is far from clear. Importantly, bitcoin does not need to win every battle to justify a sky-high price. Japan, the world’s third largest economy, has an extraordinarily high currency-to-income ratio (roughly 20%), so bitcoin’s success there is a major triumph.
In Silicon Valley, drooling executives are both investing in bitcoin and pouring money into competitors. After bitcoin, the most important is Ethereum. The sweeping, Amazon-like ambition of Ethereum is to allow its users to employ the same general technology to negotiate and write “smart contracts” for just about anything.
As of early October, Ethereum’s market capitalisation stood at $28bn, versus $72bn for bitcoin. Ripple, a platform championed by the banking sector to slash transaction costs for interbank and overseas transfers, is a distant third at $9bn. Behind the top three are dozens of fledgling competitors.
Most experts agree that the ingenious technology behind virtual currencies may have broad applications for cybersecurity, which currently poses one of the biggest challenges to the stability of the global financial system. For many developers, the goal of achieving a cheaper, more secure payments mechanism has supplanted bitcoin’s ambition of replacing dollars.
But it is folly to think that bitcoin will ever be allowed to supplant central-bank-issued money. It is one thing for governments to allow small anonymous transactions with virtual currencies; indeed, this would be desirable. But it is an entirely different matter for governments to allow large-scale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity. Of course, as I note in my recent book on past, present, and future currencies, governments that issue large-denomination bills also risk aiding tax evasion and crime. But cash at least has bulk, unlike virtual currency.
It will be interesting to see how the Japanese experiment evolves. The government has indicated that it will force bitcoin exchanges to be on the lookout for criminal activity and to collect information on deposit holders. Still, one can be sure that global tax evaders will seek ways to acquire bitcoin anonymously abroad and then launder their money through Japanese accounts. Carrying paper currency in and out of a country is a major cost for tax evaders and criminals; by embracing virtual currencies, Japan risks becoming a Switzerland-like tax haven – with the bank secrecy laws baked into the technology.
Were bitcoin stripped of its near-anonymity, it would be hard to justify its current price. Perhaps bitcoin speculators are betting that there will always be a consortium of rogue states allowing anonymous bitcoin usage, or even state actors such as North Korea that will exploit it.
Would the price of bitcoin drop to zero if governments could perfectly observe transactions? Perhaps not. Even though bitcoin transactions require an exorbitant amount of electricity, with some improvements, bitcoin might still beat the 2% fees the big banks charge on credit and debit cards.
Finally, it is hard to see what would stop central banks from creating their own digital currencies and using regulation to tilt the playing field until they win. The long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates. I have no idea where bitcoin’s price will go over the next couple years, but there is no reason to expect virtual currency to avoid a similar fate.
•Kenneth Rogoff is professor of economics and public policy at Harvard University. He was the chief economist of the IMF from 2001 to 2003.