Bitcoin: boom or bubble? Cryptocurrency takes center stage as stock market continues to climb
WEEKLY MARKET REPORT
It’s difficult to know who you should listen to when it comes to Bitcoin and where it’s headed.
One side of the aisle envisions the cryptocurrency being the money of the future, whilst others believe it’s the next dot-com bubble waiting to burst.
For now at least, cryptocurrencies can’t be ignored and they’re not.
The CME and CBOE is launching a Bitcoin futures exchange on 18th December, following its approval from regulators this week. This could see larger players in money markets become involved.
Whilst the price of many cryptocurrencies seems to change as rapidly as Melbourne’s weather on any given day, the market cap at present of the crypto market is a staggering US$300+ billion.
Bitcoin pierced the US$10,000 mark this week and then hit $11,000 two hours later, followed by a 20% plunge, only to recover back above $10,000. It’s certainly more entertaining viewing than five days of Ashes cricket.
With many investors who got into Bitcoin and other cryptocurrencies early on making small fortunes, it’s easy to see why the excitement exists around this experimental form of money.
However not everyone is a fan of cryptocurrencies, including Nobel Prize Winner in economics Joseph Stiglitz, who claims that Bitcoin “ought to be outlawed” due to its potential for circumvention and lack of oversight.
Fair enough Mr Stiglitz, I mean why would anyone want to escape from the current monetary system where we have privately run central banks lending government’s fictitious money backed by nothing, charging interest on the loans that can only be paid back by printing more money and then having citizens be ripped off through their labour/taxes in a globally accepted Ponzi scheme?
But hey, I don’t have a Nobel Prize medal to be able to answer that question for you although I’m sure you can see why people may prefer a decentralised system that is backed by blockchain technology.
Stiglitz went on to say that, “It’s [Bitcoin] a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down.”
In other crypto news, the first tokenized cryptocurrency index fund CRYPTO20 this week raised over US$35m in its initial coin offering (ICO).
Investors will be able to buy C20 tokens, that are made up of an index of the top 20 cryptocurrencies. A rather unique way to invest into cryptocurrencies that seems to have plenty of interest.
This is not investment advice, please seek professional financial advice before making any investment decision.
To leave you with an interesting fact on Bitcoin, the amount of electricity used to mine Bitcoin in 2017 is greater than the annual power usage of 159 countries.
As the cryptographic problems that are solved in the mining process get increasingly more difficult to solve, greater amounts of energy will be required to mine them and also to process transactions on the blockchain. Although I’m sure someone like Elon Musk could build more batteries to power the network backing Bitcoin.
Banking royal commission
People may not trust cryptocurrencies and for good reason. They simply haven’t been around that long enough, but that doesn’t mean that the current system is any better as alluded to earlier.
Needless to say when someone like Jamie Dimon from JP Morgan calls Bitcoin a “fraud”, it has many gasping at the irony and wondering if Mr Dimon is aware of the fraud and crime his company has been involved in over the years, simply receiving a slap on the wrist for major fraudulent and criminal dealings. Only to be rewarded with a US$12 billion bailout from tax paying citizens for the economic collapse in 2008 they helped create, but don’t think for a second that our big four banks are any better.
This week Australian Prime Minster Malcolm Turnball was quoted saying in reference to Australia’s big four banks that, “Since the financial crisis, there have been examples of misconduct by financial institutions. Some of them extremely serious. And that’s demanded a response from the institutions themselves and from government.”
It’s not often that I agree with a politician, but you win this time Malcolm.
Will be interesting to see what comes out of this, watch this space.
Dow tops 24,000 points
The Dow Jones Industrial Average burst through the 24,000 mark hitting 331 point higher, continuing the strong run since US President Donald Trump took office.
It should be noted that like most people who run for politics what they say as a candidate and once elected are two different things.
Saying that the market was a bubble being propped up by the (privately run) Federal Reserve. Now he is praising the very same ‘bubble’.
The ASX 200 closed out the week just under 6,000 points, at 5989.80.
OPEC and Russia to extend oil cuts till end of 2018
This week both OPEC and non-OPEC nations led by Russia agreed to continue the reduction in output of the world’s most traded commodity till the end of 2018. Originally the agreement was set to expire in March 2018.
WTI crude was up 2.2% on Friday afternoon at $58.65 a barrel on the news, with many factors at play which could see the oil price move higher, none more so than the increasing tensions in the Middle East.
Small Cap stocks this week
There was plenty of action as always in the small cap space, with a number of noteworthy mentions.
Fatfish Internet Group (ASX: FFG)
Keeping with the overall crypto theme, Fatfish announced this week that it will invest US$1 million of seed capital into an online virtual currency exchange start-up called Kryptos-X.
Kryptos-X is the brainchild of Australian entrepreneur Tony Mackay, who also founded alternative stock trading platforms Chi-X Europe and Global.
Services will initially be offered to citizens and resident of Singapore, before expanding into other countries where online cryptocurrency trading is permitted.
Broo (ASX: BEE)
Coming into summer there’s nothing more Aussie than having a beer on a balmy day.
But did you know that Chinese beer drinkers soaked up a massive 484.4 million litres of imported premium lager in 2016 alone, with total lager sales worth a thumping $101.39 billion?
With the beer market in China set to be worth around $136 billion by 2019, Broo is seeking to make a name for itself as an Australian brand in the Asian market.
This week signing a distribution agreement with Chinese company Beijing Jihua Information Consultant, to market and distribute Broo lager products throughout China for the next seven years.
EVE Investments (ASX: EVE)
Now onto a different kind of ‘bee’. EVE Investments’ joint venture subsidiary, Meluka Health, last week produced Australia’s first 100% organic hemp seed honey. I’m not even sure if it’s good for you, but I definitely want to try some.
This week the company announced it had received a New South Wales TechVoucher grant worth up to $15k to support the company’s bee health and honey research.
EVE shares went for a run this week up almost 100%, receiving a ASX issued speeding ticket along the way.
Queensland Bauxite (ASX: QBL)
The cannabis stocks continue to climb this week with Queensland Bauxite’s subsidiary Medical Cannabis planning to launch its first set of VitaHemp branded products at Melbourne’s upcoming Health and Innovation Expo.
Initial VitaHemp products available for consumers will be hulled hemp seeds, raw cold pressed hemp seed oil, hemp seed powder and hemp seed flour blends.
Will be adding these to the shopping list along with the hemp honey.
QBL shares were up over 400% in November, it seems the change in business direction is paying off.
Creso Pharma (ASX: CPH)
We’ve talked about beer and we’ve mentioned hemp/cannabis, so why not combine the two ‘Pen-Pineapple-Apple-Pen’ style?
Well that’s exactly what Creso Pharma is planning to do. Teaming up with LGC Capital and the Baltic Beer Company to develop cannabis and hemp-based alcoholic and non-alcoholic beverages. Add this to the shopping list as well.
Shares in CPH managed to hold at $1.015 for the week following a $15.5m placement midweek at $1.10 per share.
5G Networks (ASX: 5GN)
Listed on the ASX only a fortnight ago, 5G Networks is living up to its name for fast speed. Rapidly rising the share price chart to reach a high of 48c on Tuesday before closing out the week at 38.5c.
Having listed at 25c, the company is experiencing early success, this week announcing it has secured its Australian carrier licence and extended partnerships with Microsoft, HP and Telstra.
With the NBN being nothing short of a disaster, 5G Networks is seeking to capitalise and provide high-speed network access to companies seeking to stay competitive in the global economy.
American Patriot Oil & Gas (ASX: AOW)
American Patriot is getting set for a potentially game changing year in 2018, seeking to acquire distressed cashflow producing oil assets in Texas and the Gulf Coast.
The company this week announced plans to acquire producing acreage in South Texas that will increase its output by around 102 barrels of oil equivalent per day.
With a recently approved US$40 million debt facility to acquire assets and the company seeking to significantly increase output, we could see the news begin to flow early in the new year.
The week ahead
An eventful week coming up with October retail sales numbers out on Tuesday, along with the Reserve Bank of Australia’s decision on interest rates.
Expectations are that the cash rate will remain steady at 1.5%.
GDP figures are out Wednesday as well.