Bitcoin blasts past $8,000
Huge gain dwarfs Nasdaq’s rise in 1999.
Skeptics warn of froth in U.S. stocks. But a better example of market euphoria and excess is the meteoric rise of the digital currency Bitcoin.
The most valuable and best known of the roughly 1,300 cryptocurrencies, Bitcoin topped $8,000 Monday, extending its year-to-date gain to more than 750%.
By comparison, this year’s top-performing U.S. stock index, the Nasdaq composite, home to high-octane tech stocks such as Facebook, Apple, Amazon, Netflix and Google parent Alphabet, is up just 26%.
Bitcoin’s huge gain — and whose bumpy ride includes five rallies of more than 20% and four short-lived bear markets, or drops of 20% — even dwarfs the Nasdaq’s 86% rise in 1999. That run, of course, ended with the bursting of the Internet stock bubble.
Bitcoin backers view it as a currency and payment system of the future, as well as a new asset class that people can invest in. Believers say it’s an emerging alternative to currencies such as the dollar, euro and yen, and an investment such as gold, stocks or bonds.
Skeptics say Bitcoin is impossible to value, wildly volatile and a speculative play that may never gain widespread acceptance from governments and central banks. They brand Bitcoin a “fad,” a “fraud” and a “bubble.”
Bitcoin works off blockchain technology, akin to an anonymous digital ledger that is not currently regulated by any government or financial institution.
But Bitcoin mania differs from the ’90s tech exuberance in that Main Street’s involvement isn’t nearly as pronounced, says Gary Kaltbaum, president of money-management firm Kaltbaum Capital Management.
When asked, “Is Bitcoin the Nasdaq of ’99 or even worse?”, Kaltbaum said: “Not yet, because it is not as noisy and not as owned by the masses right now. But eventually it will be. Greed works its way through the system. There is nothing economic that backs the moves except someone willing to pay a higher price.”
J.P. Morgan CEO Jamie Dimon in September called Bitcoin a “fraud” that “will end badly” for investors.
Ray Dalio, head of the giant hedge fund Bridgewater Associates, said “Bitcoin is a bubble.”
And billionaire investor Warren Buffett has warned numerous times that it is a dangerous investment, saying, “You can’t value Bitcoin because it’s not a value-producing asset.”
Hunter Horsley, co-founder of Bitwise Asset Management, says investing in digital currencies is still in its infancy and poses risks.
“There’s no guarantee it will continue to go up,” Horsley says.