Tuesday, May 9, 2017

At $1700 per coin and climbing, is Bitcoin this year's best performing currency, or best performing investment?

It took barely 48 hours for Bitcoin to jump from $1600 per coin to over $1700, but that is exactly what took place as of this morning on May 9.  But at the same time there was an interesting caveat that also took place that begs the question of whether Bitcoin should be considered the best performing currency to date in 2017, or instead the best performing security (investment).

If Bitcoin is supposed to be a currency that runs in competition to the dollar, yen, euro, etc..., then by all monetary logic it should be moving in opposition to each individual currency that it is priced in.  However when Bitcoin jumped to over $1700 earlier today, it did so when the dollar had strengthened by over 100 bps on the dollar index, meaning that it was moving in tandem, rather than in opposition to the dollar.

Those are the actions of a security rather than than a currency.

Bitcoin Chart:


Dollar Chart:


Another interesting thing to ponder is who exactly is buying Bitcoin right now?  We know from public reports that investors/entrepreneurs like the Winklevoss Twins own between $10 - 25 million worth of Bitcoin as they bid to put the crypto-currency into a financialized ETF, and Billionaire Michael Novogratz has stated that he has put 10% of more of his wealth into both Bitcoin and Ether coin.

So perhaps the question that has to be asked is not if Bitcoin is a currency versus an investment, but what is the market itself saying Bitcoin is based on its price movement, and how it is relating to all the world's currencies it is denominated against.

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