Cryptocurrencies: Flying high or fading fast?


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Editors Note: As we go to press, cryptocurreny markets are in another stage of extreme volatility following China’s decision to shut down local exchanges. Despite erratic swings, whether in stocks, housing or cryptos, when values rapidly rise, there are always sharp market corrections. We maintain our forecast that cryptocurencies are a long term trend, not a fad and encourage you to tune in to Trends in the News each weekday night for updates.

Beginning in July, following a volatile stretch in cryptocurrency markets, prominent business analysts were nearly guaranteeing an imminent implosion of digital currencies.

Why? As billionaire investor Howard Marks forcefully proclaimed, because “They are not real.”

In September, JPMorgan Chase CEO Jamie Dimon further ratcheted up the anti-cryptocurrency hysteria saying “Bitcoin is not a real thing and it’s solely speculative… and that there’s no need for it in the US. It will blow up.” Bitcoin took an immediate hit of nearly 10 percent of its value and, as we go to press, had lost over 20 percent of its year-over-year value.

While Marks, Dimon and others compared digital currencies to pyramid schemes for their lack of “intrinsic value” and were calling for the bubble to burst, the Trends Research Institute forecast:

“… Missing from all the analytic fervor over the anticipated bubble crash is a Globalnomic® perspective. It reaches well beyond the United States. There is a worldwide movement to eliminate cash, creating a wide-open market gap for digital currencies” (Trends Monthly, July 2017).

WHAT MAKES FOR INTRINSIC VALUE?

When Marks, Dimon and others criticize cryptocurrencies for their lack of intrinsic value compared to other currencies, what fiat currencies are they referring to?

The US dollar, which the Federal Reserve prints on an as-needed, on-demand basis?

Maybe they’re referring to the Chinese yuan, backed by a country that has a debt-to-GDP ratio approaching 300 percent?

Perhaps Marks and Dimon are referring to Japan, with its 10-year zero-interest government bonds and its debt-to-GDP ratio of 250 percent?

Or is it the ECB’s negative interest rate policy and the $2 trillion-plus bond-buying schemes that have them in love with the euro?

Cryptocurrency is not real? Ask the people of Venezuela, facing one of the worst financial crises in their history, with hyper-inflation crushing the bolivar, why they are deep into Bitcoin mining.

Or maybe banksters, such as JPMorgan Chase’s Dimon, are anti-crypto because as Max Keiser noted, “ Bitcoin makes banks, essentially price gouging intermediaries and socially unacceptable leeches, obsolete. Bankers rightfully fear for their jobs as bitcoin replaces them. ”

THE GLOBAL PERSPECTIVE

Our ongoing analysis and tracking of our “No More Cash” trend, one of our Top Ten for 2017, forecasts “a global sprint toward digital currency is unfolding and turning into a mad dash.”

That’s exactly how this trend is maturing.

However, the global nature of the trend, impacting emerging and established economies worldwide, signals many twists and turns in the road ahead.

These economies, each with different laws and business practices, will need to establish new governmental and business structures to regulate the creation and implementation of digital currencies. And that process will trigger uncertainty and, as a result, dramatic swings in market activity as we have seen between July and September.

Digital currency Ethereum’s stock value climbed 10 percent in a single day in mid-August, bringing it to a 70 percent gain for the month and more than a 4,000 percent increase for the year. What fueled that rapid growth? Among the key reasons was increasing demand from South Korea investors, which accounted for 30 percent of the gains.

On that same day, London-based online trading company IG got behind Ethereum. That IG backed Bitcoin’s chief competitor positively fueled trading in that sector and served as a confidence marker in the future of cryptocurrencies.

DIGITAL GOING MAINSTREAM. PERIOD

As we have already forecast, and what too many analysts miss, is how the world is shifting. We’re going from a society based primarily on ownership of material goods and their intrinsic value to one of accessing services. Uber, the world’s largest taxi company, owns no cars. Amazon, the largest retailer, doesn’t own a chain of big boxes. And Airbnb, a worldwide lodging powerhouse, owns no hotels.

From Bitcoin to Citicoin to SETLcoin, the world is moving to digital currency. As blockchaining, the technology driving digital currencies, advances and improves, cryptocurrency becomes increasingly legitimatized and more easily accepted in a world that has less identification with currency you hold in your hand.

Further, the notion that digital currencies are speculative-only investments, because they have no physically measured value, ignores that millennials and subsequent generations worldwide are already living cashless lives.

Large segments of the global population, without a physical connection to hard cash, have no emotional connection to their national currency, and therefore do not value it as previous generations have.

Thus, the cashless trend is strengthening as societies become more comfortable with digital currency as an extension of their everyday lives.

In China, for example, while the government cracks down on digital currency exchanges, for the country’s 700 million smartphone users, many of whom make instantaneous digital transactions each day, digital is an established way of life.

Adding more volatility to the crypto craze is the recent announcement that the Chicago Board Options Exchange, the biggest US options exchange, plans to offer Bitcoin futures trading in the coming months.   TJ

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