Bitcoin tops Nasdaq in survey of world’s most crowded trade

Its popular now for investors to buy each and every dip in Bitcoin price, but also for hedge fund managers to talk about what a bubble Bitcoin is. Who knows which side is right – maybe its both.

I will say this chart from Bespoke Investments caught my eye:

My main issue with this is that Bitcoin is in its infancy and starting from zero. Many saying “its a bubble” follow the bitcoin price from 6 cents to the current level and say that simply based on the percentage return makes it a bubble.

Whats clear is that if you are a money manager it has to be painful if you missed this ride up.

From the Nasdaq:

Bitcoin tops Nasdaq in survey of world’s most crowded trade

     ft.com
Source: ft.com

Ominous omen? Bitcoin, the crypto currency that has exploded higher this year, has overtaken the also-buoyant Nasdaq Composite as the world’s most crowded trade, according to a closely watched survey released on Tuesday.

Some 26 per cent of investors polled by Bank of America Merrill Lynch in the first week of September said betting that bitcoin will rise is the most crowded trade of them all. That puts it ahead of 22 per cent voting for the Nasdaq and 21 per cent pointing to an anti-dollar wager. Nasdaq was pinned at about 30 per cent in the August survey.

Bitcoin has been garnering more mainstream appeal of late and has been catching the eye of risk-loving retail traders. It has surged from $968 to the dollar at the end of 2016 to above $5,000 last month, according to Coindesk data. It traded at $4,352.58 on Tuesday.

Notably, other crowded trades in recent history have not ended too well. The dollar was at the top for much of the start of this year, according to BofA Merrill. The currency has tumbled 10 per cent against six major trading partners since December 30.

 

 

From CNBC:

Bitcoin’s nearly five-fold climb in 2017 looks very similar to tech bubble surge

  • David Ader, chief macro strategist at Informa Financial Intelligence, shows how bitcoin’s gains resemble that of the Nasdaq Telecommunications Index before the tech bubble burst.
  • Bitcoin has gained nearly 400 percent this year, helped by increased interest from institutional investors.
  • However, digital currency expert Chris Burniske points out the market value of bitcoin is still a fraction of what stocks were during the dot-com boom.

Short seller Andrew Left targets Grayscale’s Bitcoin trust  

When charted, bitcoin‘s rapid gains resemble how stocks surged into the tech bubble before collapsing.

David Ader, chief macro strategist at Informa Financial Intelligence, matched a graph of the Nasdaq Telecommunications Index at its peak in 2000 to bitcoin’s five-year run to all-time highs.

“This is the price chart for an overly frothy market, in my opinion. I just don’t see anything quite as comparable to this in bubblelicious terms,” said Ader, a former top-rated bond market strategist.

Bitcoin climbed more than 3.7 percent Thursday to a record of $4,802.74, up nearly five times in price this year and about 67 percent higher for August, according to CoinDesk.

Source: Informa Financial Intelligence

“I think it’s going to come to a sorry ending,” Ader said. “I don’t know anybody who’s actually used a bitcoin for any purpose legal or otherwise. This looks like an overly frothy market and frothy markets lose their froth.”

Ader said he used the Nasdaq telecom index since many of those stocks led the Nasdaq composite’s overall gains during the tech bubble. The Nasdaq telecom index shot up more than 700 percent from 1995 to 2000, before collapsing 90 percent in the next two years. The index remains about 75 percent below its record high.

Bitcoin’s meteoric surge this year comes as many on Wall Street are becoming more interested in the digital currency and the blockchain technology behind it. New digital asset investment funds are rolling out and the Chicago Board Options Exchange is planning to launch bitcoin futures.

Many investors also bought bitcoin this month after it survived a relatively uneventful split on Aug. 1 into bitcoin and bitcoin cash, an alternative version supported by only a few developers. Bitcoin cash is up about 180 percent from its Aug. 1 low, to Thursday’s price of $588, according to CoinMarketCap.

However, bitcoin could split again this fall because there’s another upgrade proposal, and others have warned that the speculative forces behind bitcoin could quickly turn against it.

Here are a few of the alarm bells sounded this summer:

By percent change, analysis from Bespoke Investment Group shows how bitcoin’s surge has already well surpassed that of any major stock market bubble.

Source: Bespoke Investment Group

That said, some well-respected names on Wall Street have also issued positive reports on the digital currency.

Lee and Moas both reason that bitcoin can climb to those levels if even a fraction of the trillions of dollars in gold or other traditional investments move into the digital currency.

Bitcoin has a market value of about $78 billion, and digital currencies overall are worth $170 billion, according to CoinMarketCap.

That makes the value of all digital currencies less than 5 percent of the more than $4 trillion inflation-adjusted value of stocks during the tech and telecom boom, said Chris Burniske, author of the upcoming book, “Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond.”

“If people think this is the ‘big bubble,’ then they don’t have an appreciation for how big the idea of cryptoassets really is,” he said.

Many digital currency enthusiasts agree there is speculation in the digital currency. But they note that, just like the dot-com bubble, companies that were able to utilize the underlying technology then became global giants.

Will the China ICO Ban Hurt Bitfinex

Its now widely known that China banned ICOs and even asked that ICO’s give money back to investors.

Where this could bring major problems is to exchanges and other entities that use Tether for funding. Tether, as I understand it, could be swept up in the ICO ban and could well be affected by this and China is a huge trading market.

Currently cryptos on Bitfinex like Bitcoin, Ethereum and Litecoin are all trading at a significant discount to US exchanges. Here is a shot between kraken at top and bitfinex on bottom, you can see a ~$200 price difference:

Kraken Bitfinex Bitcoin
Large Price Difference between Kraken and Bitfinex on ICO ban China

It should be noted that OKCoin is down around $4,080 at this time – so its possible that its just asian exchanges being hit harder by the ICO ban.

It will be interesting to see what the shakeout from this China ICO ban is over the next few days. I have a feeling there will be some casualties.

Bloomberg Coinbase Hit Piece – Sell Bitcoins No Payout

This article from Bloomberg talks about a “surge in customer complaints”…up to 293 about Coinbase. The article proceeds to use terms like “scam” and says that people who sold Bitcoin aren’t getting their money in the time frame quoted by the company.

Yes, they do mention that Coinbase is getting a lot of new users – but they don’t define just how many. Its MILLIONS of new users. 

I’m not suggesting that Coinbase has great customer support, or that they aren’t without problems. But linking them to “scams” is ridiculous. Step back for a second and think about this:

293 formal complaints against MILLIONS of new users, hard forks, record volumes.

That ain’t bad. Inconvenient even aggravating for users who need their money? Yes. Scam, no.

Tip Strippers with Bitcoin in Vegas

I appreciate the innovation. I’d be curious how much of this is a marketing scheme versus something that actually improves profit. It seems like it would be beneficial to reduce credit card fees. I’m sure that all the cash gets reported to the IRS, as would all the Bitcoin.

Mashable: Tip Strippers With Bitcoin.

If you’ve amassed a fortune in Bitcoin and don’t know how to spend it, here’s an idea: Go to Las Vegas and squander it all on booze and lap dances.

Legends Room is a “gentleman’s club” that accepts Bitcoin, Ethereum, and its own cryptocoin LGD for all transactions.

That means you could go there on August 26 to watch the boxing bout between boxer Floyd Mayweather and MMA fighter Connor McGregor, and pay for everything with bitcoins.

The basic experience is in the main room of the club, which is open to the public and charges $150 (payable in crypto) to watch the fight. If you opt for the members area, you need to own 5,000 LGD tokens (if you don’t have them, you can rent them at the entrance). And if you don’t really care about this crypto business, you can pay for everything in cash and credit card.

The current price of the LGD token on Bittrex is about $2.15 per token, but you know how it is with these volatile cryptocurrencies — prices could go up or down before the event. The token itself doesn’t appear to have any technical advantages over similar cryptocoins, but ownership nets you significant discounts on drinks and club services.

If you’re still unsure whether all this is too adult-only to bring your underage nephew along, keep in mind that the place will be teeming with porn stars during the event, including Jesse Jane and Tasha Reign.

Public Service Notification: Bitfinex

First I’d like to say I have no idea if any of the below is either:

A) True

B) If it is true – that it results in Bitfinex blowing up.

This is a notification that if you use Bitfinex you should be doing some homework.

The general outline is that Wells Fargo cut off Bitfiniex – and Bitfinex started to leverage Tether for their funding. Tether is a currency their sister company started. Since April there has been a 400% increase in the amount of Tether. A second site offers that this Tether can be used for margin trading and this could be influencing the price of Bitcoin.

Read in depth research here:

I’d note that Mt. Gox made some errors and attempted to inflate the price of Bitcoin to get out of their trouble.

There were also some other strange happenings with Bitcoin Cash. After the fork Bitfinex changed their distribution method i.e. they went back on their word.

They also recently announced to stop adding US Customers.

Again – I am not saying to panic. But I am saying do some research.

Bitcoin: Move +$160 million for 67 Cents

Imagine what sirens would go off if you walked into your bank and asked to move $160,000,000. What do you think that would cost? How long do you think it would take? What body tissue samples would they ask for in the name of terrorism or the IRS?

Not with Bitcoin. Someone moved $160 million for 67 cents. It only took a few minutes.

Large Bitcoin Transaction
Large Bitcoin Transaction

This image is not mine – I unfortunately lost the link. If its yours please contact me.

Some Guy From Forbes Craps on Bitcoin

This article from Forbes: 

A Bitcoin Is Worth $4,000–Why You Probably Should Not Own One

is quite a ridiculous read. I don’t disagree with his underlying thesis: (I’m paraphrasing )”Bitcoin is rife with speculation”. But his article is full of contradictions and he demonstrates a lack of knowledge about the utility of Bitcoin. He says its just some currency, but it has no value. And he ignores any of the current and future utility of Bitcoin.

He advocates “investing” your money, not “speculating”. That makes sense it a lot of situations. Buying bitcoin is pure speculation, he says. I mean no one ever speculated in stocks or real estate, right? And he forgets to mention that just holding a fiat currency is inherently speculation that your purchasing power wont decrease.

This is the final line, which is all you need to really see:

The Bitcoin currency is not managed by any government agency, nor is it backed by any government.  Bitcoin values are purely dependent upon holders having faith they will continue to have value.

Talk to the people in Venezuela about currencies “managed” by government agencies. See how that “investment” worked for you:

Venezuelan Bolivar Chart

Second – the entire economy runs on faith. EVERYTHING. Its all trust. Houses have values only when people trust they will hold. Same with stock markets, food and all the rest. What happens when people lose faith in the economy? Just look back to 2008 when the entire economy almost collapsed.

His advice has some merit. I think hes trying to say that Bitcoin is a volatile investment and you should know what you’re doing before investing. But that goes for every investment you will ever make. Its no different than art, real estate, gold, or anything else – do your homework and make informed decisions.

“Bitcoin Cash” Injection Making Cryptos Rise in Price

Last week Bitcoin paid a “special dividend” (as I like to call it) “Bitcoin Cash”.  As is well known anyone who owned Bitcoin during the hard for received new coin, bitcoin cash. Well, it seems to me that this new found money fueled quite a price rise in Bitcoin as presumably holders of Bitcoin sold some of their Bitcoin Cash and used those funds to invest in other cryptos. Its a bit like quantitative easing.

It should also be noted that the fork went flawlessly with no market disruptions. Some had predicted dire happenings for Bitcoin over this fork. It went very well, and that had to bolster confidence in Bitcoin.

Combine the “special dividend” and increase trust and you get higher prices. You can see in the chart below that as Bitcoin Cash has been tanking (orange line) Bitcoin (in blue) has been leaping.

Bitcoin vs Bitcoin Cash
Bitcoin vs Bitcoin Cash Chart

Don’t forget big news from Wall St including the CBOE adding Bitcoin Futures as mentioned here. In my opinion all this clears the way to higher prices.

S&P500 and Ethereum Moving Together?

Yesterday we mentioned some interesting moves that seemed in sync from the US stock market and Bitcoin/Ethereum.Today was another curious move.

The chart below shows a good move up in the S&P500 (an Index of the US stock market) and Ethereum. Both moves occured right in the 10:11-10:12AM EST time frame. The top chart is Ethereum from GDAX and the bottom is the S&P500 (SPX).

Clearly there are good sized traders out treating Ethereum and Bitcoin as an asset class like equities…

Ethereum vs US Stock Market
The S&P500 Moved up in sync with Ethereum