Wall Street divided on cryptocurrencies

The House of Morgan is divided over bitcoin.

While JPMorgan chief Jamie Dimon is so anti crypto that he even belittled his daughter’s trading bitcoin and told his traders if he found them trading cryptos they would be fired for stupidity.

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Who will catch the falling knife that is bitcoin price?

September has been the cruelest month for bitcoin.

On the first of the month the price was $4,950. This morning’s low price was $3,036. Nearly a 40% decline over the first half of the month.

While many stories point to the Chinese crackdown on the cryptocurrencies through the exchanges and others give a nod to JPMorgan chief Jamie Dimon’s comments at the beginning of this week, I believe it has more to do with the newest investors in the crypto space.

The “investors” who came in at $3,000 and up — after finally learning how to buy a crypto — all they wanted to know after that was how to sell it. No buy and hold. Make a quick return and get out.

With that said, I could see bitcoin settling around this level as the shake out of newbies is completed. Remember no chart goes straight up from left to right.

If you recall earlier this summer, bitcoin had roughly a 34% drop in mid June, but by the middle of July put in a floor in at $1,995 and marched on to just below $5,000 from there.

You need a shake out in the markets — whether its stocks or cryptos — to set a floor to build on. The trouble is 40% down in two weeks is teetering on a panic and re-enforcing Dimon’s comments of it ending poorly.

However, the huge sell off on a percentage basis should not be directly compared to stocks since bitcoin does not have a Plunge Protection Team to come in and catch the falling knife when the market is experiencing panic selling.

IMF eyeing blockchain for roll out of SDR to replace US dollar: Rickards

I was talking to a currency trader, Thursday on the train going home. He knows I’m a business editor at a large paper in New York City.

He was telling me how Fx traders were not taking any positions after the end of this year. How the markets were constricting and said it was a huge problem and perhaps a bigger story.

I asked why? Was there a global currency coming or perhaps a reset?

All he could tell me as we got off the train was that I should look into it.

I researched over the weekend, and could not come up with anything. Now admittedly, I don’t usually look that deep into the currency trading world. It’s a closed community that’s not very transparent or accessible.

However this morning I did see that James Rickards, author of “Currency War,” among other titles and cited here before, put out an open letter to President Trump warning him of problems in the US dollar.

The nutshell of the letter is that beginning Jan. 2018 the International Monetary Fund — using blockchain technology, which is the same technology that bitcoin and other cryptocurrencies use, will be issuing Special Drawing Rights (SDR) as a new world currency to replace the dollar.

Now I find his letter highly doubtful given the quick timing of implementation, however I have this currency trader from Deutsche Bank telling me there are problems in the Fx markets, prior to the paper being published.

So I have two sources essentially saying the same thing.

Rickards does cite white papers and statements from IMF chief Christine Lagarde talking about SDRs and certainly Rickards has a long history of talking up the SDR as a world currency, replacing the dollar.

So what does this mean in the big picture? Rickards writes:

Just look what happened the last time we had a big change in our global financial system. In 1971, Nixon announced the U.S. would no longer officially trade dollars for gold. That created a lot of uncertainties, turning that decade into a nightmare for stock investors.

 

Take a look… the Dow Jones, an index of “stable” blue chip stocks (the kind most retirees like to hold), was cut in half. Stock investors bailed out of the market and, for the most part, didn’t come back for a decade.

 

I expect something similar once Distributed Ledgers go live.

The transition from a U.S. dollar system to a new system dominated by SDRs will be messy. Stocks will collapse… and will stay down.

 

There will be no recovery this time, because the U.S. government won’t be able to come to the rescue like they did in 2008.

 

You [President Trump] won’t even have funding for normal operations, let alone enough funds to save stock investors.

 

There has been a plenty of selling of the dollar recently, but that’s against other currencies like the euro and pound, If the IMF’s plan is true those currencies would also be devalued, so that is not a good indication of the plan.

Unless you figure in a currency trading scenario where the 800-lbs gorilla is the dollar and it is weakened, then all other currencies in the world will gain.

If crude can be traded in any currency, then there is big trouble in not only the currency market — a small backwater trading operation — but Treasury trading will implode.

That’s where Rickard’s nightmare scenario comes to fruition.


9-11-01: Never Forget

Bitcoin market cap approaches gold ETF value

It appears bitcoin and Mark Twain have something in common. Reports of their deaths have been greatly exaggerated. Certainly bitcoin has had more obits than the one Twain was referencing.

While Russia and China have come out with restrictions on new digital currencies being created, bitcoin has seen 10% to 15% pullbacks, only to come back and move higher after the smoke clears.

Wednesday morning pricing is difficult to get as CoinDesk’s site has not updated its site in a few hours with the price static at $4,519. World coin index has it at $4,562 up 3.7% for the day.

There’s an interesting stat I came across this morning. The value of all bitcoins is fast approaching the value of gold ETFs. Bitcoin with a market cap of $78 billion will soon exceed the $90 billion in gold held in the ETF.

When you figure in the value of all cryptocurrencies, the market cap is $155 billion, topping the value of the precious metal fund’s holdings.

 

How can you chart future price bitcoin? No one knows.

On July 15th bitcoin was trading at $1,999, with the news being that there was a split in the direction that the people working within the digital community of how the cryptocurrency was going to move forward.

This morning it is trading at an all-time high of $3,392. It rose $70 by the time I wrote the paragraphs below this one. The question is why?

How can I rationalize telling people to get into BTC, if I have no idea what the price will be in 12 hours, or two hours from now?

Understand that this is so new that 99% of Americans have no idea what I am talking about. And if they heard about BTC, 99% of them do not know how to buy it.

So with that said and according to the bitcoin white paper that roughly 70% of the 21 million bitcoins that will be created are in the marketplace, what the driving force behind the price discovery?

It’s not like buying Apple at $0.21 a share in 1982, based on the idea they have a magical box called Lisa. The reason being they had a box and how well the box was received would determine the price.

Bitcoin has the utopian premise that it is outside the dollar hegemony, yet it is priced in dollars and all other currencies. It has the full-faith and credit of the code behind it, which means it is not legal tender for all debts public and private.

How can you turn any profit into a purchase, since most retailers will not accept bitcoin because the transfer of the transaction could take days sometimes. So if you buy something worth $4,000 with a BTC on Moday and the price crashes on Tuesday, the retailer is out.

Listen I have dabbled in it, just like I did in Apple in the early 80’s, because I’m into those type of things and am not complaining about the run up in price of either investment.

However, telling someone this is a good investment and you should get in, is another thing entirely.

These are heady times for all cryptos, and a year from now I could be laughing at this post as the price hits $10,000 or maybe $1,000. I have no way of knowing which outcome is more likely, since I have no way of modeling the price movements.

I will say this about BTC. If someone builds a better and easier way to purchase BTC, without needing to be a computer whiz of finding a digital wallet and yada, yada, yada, that would go a long way of bringing more people into the pool.