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Wall Street players do not talk well about cryptocurrencies
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Loading...Forget Donald Trump or the Federal Reserve. It seems the only thing Wall Streeters want to discuss
is the meteoric rise in the price of bitcoin -- and not in a good way. The crypto-currency has soared above $2,200, more than doubling since late March. In fact, if you were lucky enough to buy $1,000 worth of bitcoins in 2010, you'd have $36.7 million today.
Even with that jaw-dropping performance, bitcoin is struggling to gain any respect. Brown Brothers Harriman came out with a report today eviscerating bitcoin and other crypto-currencies, saying they are currencies in name only because they contain a fundamental contradiction. According to the firm, if they’re a supposed to be an alternative to fiat currencies, they should be hoarded as a store of value. But if they’re hoarded, they can’t develop the critical mass of networking needed to fulfill the other functions of money, such as a means of exchange. Their volatility also means they're not a good store of value. Whereas bitcoin often moves 2 percent to 3 percent or more per day, the dollar usually doesn’t move more than 1 percent. To the extent that some retailers accept them is a bit of a novelty and
marketing fluke, not confirmation of its currency status.
"These are not currencies in any meaningful sense," Brown Brothers strategists led by March Chandler wrote in the report. "They are currencies to the extent that contacts on Facebook are friends and the 'grande' means medium size at Starbucks." About 16.3 million bitcoins exist, with about 1,800 new ones created, or mined, per day. That puts the size of the market at about $36 billion, versus the $5.1 trillion that typically trades daily in the traditional foreign-exchange market. Reasons for the rally vary, but include a decision by Japan last month to recognize bitcoin as a legal payment method.
Source: Bloomberg Pro Terminal
Junior Trader Stefan Panteleev
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