I don’t understand Bitcoin. I believe the general inability to discern the underpinnings of cryptocurrencies is a pillar of its meteoric rise. An asset, if that’s what we can call it, not saddled with intrinsic, granular measures of value can trade on intangibles and momentum. Bitcoin is not nuisanced with earnings, yield, or other benchmarks for valuation.
Similarly, one of Amazon’s (NASDAQ:AMZN) genius moves has been to shed a source of gravity, keeping most retail stocks in the near-stratosphere. That source of gravity is profits. Amazon’s stock trades more on intangibles – vision and dominance.
I was on Bloomberg and CNBC this week (because I’m a really big deal). Both times I was asked to comment on Bitcoin. If you believe this means many of the people on TV discussing investments don’t have a deep understanding of what they’re talking about, trust your instincts. But I digress …
If it’s just straight supply and demand, then Bitcoin should enjoy more gains. The generation powering Bitcoin saw their parents get rich off stocks, but also saw them get hit hard in the recession, turning them away from stocks and on to speculative investments. The chaser effect here is the world’s largest infection of FOMO. Despite not understanding nor owning any Bitcoin, I’ve been on the Coinbase app this week exploring how I too can get rich and, more importantly, feel young again.
My best attempt to distill the Bitcoin phenomenon is that crypto is a chaos proxy. As young people lose faith in institutions, they turn to investments that aren’t affiliated with nations, central banks, or the institutions that govern them. A pretty easy correlation is the election of Trump, the ensuing chaos, and the 2000+ percentage gain in Bitcoin. On election night Manhattan residents recognized we really do live on an island.
I predicted on CNBC that if Roy Moore won the Alabama senate race, Bitcoin would explode the following day, as chaos would gain momentum. He lost, and it looks as if Bitcoin responded. Things started looking ugly for the judge around 7pm, when Bitcoin was trading at $17,259. The AP called the race for Jones at 10:23pm, and by 11pm it was trading near day lows at $16,465. Note, as I write this at 1am it’s recovered most, if not all, of the losses.
There have been a number of chaos-inducing moments in 2017. But my vote goes to Trump’s “fire and fury” comments about North Korea on August 8th. Over the next seven days, Bitcoin increased 25% from $3,358 to $4,181. So? Safe havens, like gold, aren’t new. But this feels different. Crypto is the collective eyeroll of a generation that looks at its parents and sees them celebrating the election results in Alabama, boasting redemption in a 1.5% margin of victory over a pedophile. The signal from Tuesday’s election is not inspiring or faith restoring, but simple: