December 04, 2017
By Darryn Pollock - November 27, 2017 (cointelegraph.com)
Looking at the total market cap of the cryptocurrency market, which recently crossed over the $300 bln mark, it is both exhilarating and terrifying at the same time. This digital currency world that came into being less than 10 years ago has grown astronomically in such a short space of time.
Indeed, 2017 alone has seen just Bitcoin go from $800 to nearly $10,000, and there is still a month to go. The records have crumbled for the Big digital currencies, as well as the new ones as the boom in ICO’s have also help set unprecedented growth.
Thus, as the most impressive performing asset class ever seen, surely Bitcoin is on the verge of taking over the world? Even that has two ways of being viewed - in relation, or in fear - but, no, Bitcoin is a small fish.
Looking at the actual commodity markets out there, and weighing up Bitcoin’s $300 bln, it quickly becomes apparent that the digital currency is still splashing in the shallow end.
Gold, which Bitcoin is supposed to be challenging, has a market cap of $6 tln. On top of that, only about a fifth of all the mined gold is held for private investment purposes, the rest is either in jewelery - the large majority - or the official sector, or still underground.
Thus, seeing as the value of all gold mined comes in just over $7 tln, about $1.6 tln of it is being used for private investment purposes.
Look deeper at the markets. Equities, another investible asset, has a market cap of $55 tln; then there is $94 tln in securitized debt and $162 tln in residential real estate, according to a 2016 report.
So, what does it mean if Bitcoin is a record breaker for speed, but not for size? It breaks down a lot of the bubble talk that is floating around there. For a market that only makes up 0.3 percent, when put next to residential estate value, securitized debt, equities, commercial real estate, farmland and gold, -- it can hardly be called a massive bubble.
When it comes to bubbles, and overvaluing, stock picker and Bitcoin Bull Ronnie Moas breaks down the numbers a little more.
“We currently have $200 tln in the world tied up in cash, stocks, bonds and gold alone and all four of those, in my opinion, are overvalued. If 1/2 of one percent of that 200 tln dollars ends up in Bitcoin, you are looking at a one tln dollar valuation that would be above where Apple Computers, the most valuable company in the World, is today.”
November 26, 2017
By News Desk - November 25, 2017 (cryptovest.com)
The Old Mutual Gold & Silver Fund invests in Bitcoin; calls the cryptocurrency “digital gold”.
The Old Mutual Gold & Silver Fund, which has $220 million worth of precious metal equities under management, is looking to partake in the success of Bitcoin.
Claiming Bitcoin was “explicitly designed to be digital gold”, fund manager Ned Naylor-Leyland said:
“… if you’re going to have a small proportion of a fund in Bitcoin, it should be in a gold fund, because that’s exactly the point. It’s about bringing the ownership of disciplined money into the modern world. Bitcoin is paving the way for the reintroduction of gold as global money.”
The fund started investing in Bitcoin in April this year, with the goal to dedicate 5% to cryptocurrencies. Ultimately, the aim is to obtain profits from Bitcoin, and then reinvest these in gold and silver assets.
Compared to gold, Bitcoin is prone to volatility and its sudden and drastic price fluctuations have put many an investor on the backfoot. Currently trading at above $8,000, Bitcoin has risen almost eightfold in price since the start of 2017.
Gold, by comparison, is steadier in its price movements, and has remained in more or less the same range throughout the year, except for a brief upward spike in September when uncertainties caused by tensions between the United States and North Korea led to increased investment.
Earlier this year, a report by Goldman Sachs concluded that gold was far superior to Bitcoin as it was more durable, had greater intrinsic value, and was a better store of value than Bitcoin, with a less volatile market. The only factor in which Bitcoin was deemed better than gold was its portability as compared to bullion.
While the cryptocurrency may have its detractors, Bitcoin’s steadily increasing price suggests investor confidence remains high. Earlier this week, billionaire Mike Novogratz gave the digital currency his vote of confidence, predicting that Bitcoin would reach $10,000 before the end of 2017.
Highlighting the positive aspects of Bitcoin and blockchain tech, Naylor-Leyland observed that Bitcoin is the answer to the problems of divisibility, ownership, and transmission speed which are associated with gold.
“We’re going to revert to sound money,” Naylor-Leyland said. “If you imagine sound money and blockchain together, there’s quite an exciting potential outcome.”
November 16, 2017
By C. Edward Kelso - November 16, 2017 (news.bitcoin.com)
Neil Hume, Mining and Commodities Editor for Financial Times, was quick to have World Gold Council Head of Market Intelligence, Alistair Hewitt, dismiss bitcoin’s ascendancy as a reason for gold’s third quarter (Q3) performance woes. He paraphrases Mr. Hewitt as having said, “there was nothing to suggest gold was suffering from the popularity of cryptocurrencies such as bitcoin, which have experienced explosive gains this year.” There is reason to be skeptical of that claim.
Gold Currents Might Turn Trends
Fortune’s David Meyer writes, “More people are now searching online for how to buy bitcoin than they are searching for how to buy hold,” according to Google Trends. Gold is the classic hedge against stock market volatility, especially during downturns.
That might be changing if Q3 figures are to be extrapolated into a full-fledged movement or current.
It certainly doesn’t help to have a booming stock market at the moment along with a new commodity asset in cryptocurrencies. Leaving out the entirety of the legacy markets, bitcoin alone has appreciated many hundreds of percentages in just 2017.
“Demand for gold slumped to an eight-year low in the third quarter,” Mr. Hume reports, attributing the record fall to “the prospect of higher US interest rates and tighter monetary policy” which “resulted in less [gold] buying from institutional investors.”
Gold demand falls 9% to 915t in Q3 as ETF inflows slow from unprecedented highs in 2016, the latest World Gold Council report of 8 November 2017. It “showed demand for bullion fell to 915 tonnes in three months to September, down 9 per cent from the same period a year ago.”
“The latest figures were hit by ‘significantly’ lower inflows into gold exchange traded funds, which fell to 19 tonnes from 144.3 tonnes, and a softer jewellery market in India,” Mr. Hume detailed. (India is second only to China in gold consumption).
The “world’s biggest consumer of gold after China — dropped 25 per cent year-on-year in the quarter to 114.9 tonnes,” Financial Times notes.
Quoting Mr. Hewitt, “It was a tough quarter for gold demand,” and, paraphrasing again, “Mr. Hewitt said net inflows had remained weak during October with just three tonnes added to ETFs as investors chased higher returns from assets such as equities and bonds.”
Central Banks are the Health of the State
And here is the a-ha! moment: Mr. Hewitt anticipates gold’s rebound due to “buying from central banks. Led by Russia and Turkey, central banks added 111 tonnes to their gold reserves in third quarter, 25 per cent more than in the same period in 2016,” Mr. Hume claims. Quoting Mr. Hewitt approvingly, “We now have another central bank that is buying 10 tonnes a month,” in reference to Turkey. “That’s a significant development that hasn’t been picked up by people looking at the gold market.”
Things have become so desperate in the gold market, the metal’s heroic past of taming governments, of spiting them, has given way to alms: hands out, begging for central bank acceptance.
Central banking is contrary to peace. Once such power was consolidated around the world by the early 20th century, even gold standardization of currency fell out of favor, and the rush toward inflation became all the rage. The power for governments to control money supplies is too tempting to trust with gold, but it is a way to stay relevant beyond circuit boards and jewelry. And central bank inflation is often overlooked for its keen martiality, its propensity for war and state expansion generally.
Governments in the inflation age can promise all sorts of goodies to subjects, march them off to war without a financial care (much less lives loss), and generally consolidate while also expanding power. If there is one takeaway from the entire 20th century and our present time, an inverse relationship exists between human freedom and government growth.
Gold no longer offers hope in this regard.
Bitcoin as Hope for Peace
The swirling debate at present is what bitcoin constitutes as a currency and network. It’s clearer to me bitcoin of the BTC variety, segwit bitcoin or whatever you’d like, is going to remain, if it does at all, a store of value and ultimate unit of settlement. Bitcoin cash (or a variant) might very well become the fungible, everyday currency of Satoshi’s digital cash ideal. With well-known transaction fees ever-rising and processing times thudding it along, BTC doesn’t in the near-term figure to be a currency in the easiest sense of that word.
This means there’s a chance bitcoin could replace gold as the future hedge, a way for people to fight inflationary warmongers and chiefdoms.
With CME’s entrance into the bitcoin foray, and if institutional investors bring whales, along with blockchain dreams, BTC could very well reach price highs pegged by Fundstrat’s Tom Lee of 25,000 USD and beyond.
Images courtesy of: Pixabay, ET online magazine.
C. Edward Kelso is a long-time fintech journalist, passionately covering the cryptocurrency space since 2014.
November 05, 2017
By Jacob J - November 05, 2017 (cointelegraph.com)
Political uncertainty in the Middle East has risen to an all-time high, with Saudi Arabia arresting the richest Arab in the world, Prince Alwaleed bin Talal. Could this result in a shift to Bitcoin, the digital safe haven, in the Middle East?
Saudi Arabia's crackdown
Saudi Arabia has initiated a sweeping crackdown, ostensibly against corruption, today. King Salman has ordered the arrest of senior princes and ousted many senior officials from ministerial roles. The list of people arrested includes Prince Alwaleed bin Talal, the richest Arab in the world.
Prince Alwaleed was in the news recently for his negative views on Bitcoin, saying that Bitcoin would face an Enron-like collapse. While the public reason given by King Salman for the arrests is his drive against corruption, many commentators believe that the King could be clearing the route for his son, Crown Prince Mohammed bin Salman, to take over as the King.
Qatar under siege
From early June 2017, Qatar's neighbors - Saudi Arabia, Egypt, Bahrain and UAE have imposed a blockade on the country, accusing the country of harboring Islamic militants and maintaining a relationship with Iran, Saudi Arabia's staunch enemy.
Qatar is a small country in the Middle East, with large natural gas reserves. According to the World Bank, it is the country with the highest per capita GDP based on purchasing power parity ($127.5K in 2016). It will also play host to the 2022 Fifa World Cup.
Many believe that the actual reason for Qatar's neighbors imposing a blockade is Qatar's support for Al Jazeera, a news organization which has aired views contrary to the established position in the Middle East. Given the absolute power enjoyed by governments in the Middle East, an independent news channel in the region has raised many hackles.
Bahrain on the verge of collapse
Bahrain is one of the smallest economies in the oil-rich Middle East, with its GDP five percent the size of that of Saudi Arabia. Its economy is oil dependent and the recent lull in oil prices has resulted in its economy getting strained.
The Central Bank of Bahrain has pegged its currency to the US dollar (0.376 Bahrain Dinar = 1 US dollar), but this has come under strain with dwindling foreign currency reserves. According to Bloomberg, Bahrain has approached Saudi Arabia for support to stave off a financial crisis and impending devaluation. Currency devaluation in Bahrain would spark a contagion effect in the Middle East, where most currencies are pegged to the US dollar.
Bitcoin rises when governments screw up
Misconduct by governments, either in the political or monetary space, results in people trying to find safe havens for their wealth. Traditionally this has been gold, but Bitcoin is fast developing as an alternate safe haven, with its decentralized and boundary-less nature.
The Middle East is strategically important, both because of its vast oil and natural gas reserves and the tremendous wealth of its citizens. If rich sheikhs in the Middle East think that parking a fraction of their wealth in Bitcoin makes sense given the uncertainty in the region, Bitcoin's price could scale new highs.