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'Real' Value of Most Cryptocurrencies Closer to Zero Than $10,000

'Real' Value of Most Cryptocurrencies Closer to Zero Than $10,000
(Mikhail Primakov/Dreamstime)

By    |   Thursday, 18 January 2018 07:40 AM

Bitcoin represents now something like a spending power value of around $10,000

Does $10,000 matter?

In a rational world, whether something is fundamentally valued or not does matter, round numbers do not matter. In a bubble, which is by definition irrational, round numbers do matter because round numbers impact psychology and loss aversion, and that is pretty much all there is to play around with in a bubble.

The fundamental value of most cryptocurrencies is likely to be a lot closer to zero or $0.0 than it is to $10,000.

Elsewhere, China released GDP data for the fourth quarter of 2017, and consequently for the year as a whole.

The Chinese economy expanded 6.8 percent year-on-year in Q4 of 2017, the same as in the previous quarter and beating market expectations of 6.7 percent, which, of course, didn’t surprise any investor. 

Considering full 2017, the Chinese economy grew 6.9 percent, which is well above the official target of near 6.5 percent and the 26-year low of 6.7 percent in 2016.

All this is in line with the estimate made last week by Chinese Premier Li Keqiang and consistent with the target set early last year of "around 6.5 percent or higher".

At annual meetings of the Communist Party held last month, Chinese President Xi Jinping pledged his support for further structural reforms in the domestic economy, including efforts to boost household consumption and to promote higher-value production in the Chinese manufacturing sector.

Investors could do well not to overlook the fact that official growth forecasts in China exist to be beaten.

However, the suggestion is that the Chinese economy is perhaps stronger in 2017 than reported because previous years were weaker than reported.

There is a lot of evidence to suggest that Chinese official statistics operate using a smoothing pattern.

This matters, not because of the effect on global GDP aggregates. Global GDP aggregates are pretty meaningless statistics on a good day.

It matters because any assessment on how global demand affects credits, the environment, employment, trade and so forth, could well be relying on “dodgy” data from China.

It is also worth remembering that Chinese activity will need to slow. China’s growth rate is at an above sustainable rate of growth (!). That means that growth exceeds what is sustainable in an economic sense, but also it exceeds what is sustainable in an environmental sense.

There are parts of China where we see declining life expectancy as a result of environmental pollution

That is not what is expected from an economy at China’s stage of development.

For comparison, China’s economy is ranked as the third most important economy of the world and, based on data of the IMF, China had in 2016 a nominal GDP of $11.2 trillion coming in after the U.S. whose nominal GDP stood at $18.6 trillion and the European Union (EU) that had a nominal GDP of $16.4 trillion.

That said, the United States is offering us today little to compete with this level of interest and excitement that give us the Chinese data.

There is the Philadelphia Fed opinion poll on business sentiment, which can be carefully filed away under the category of meaningless noise.

U.S. housing data is a little more interesting as capacity restraints do appear having an impact on housing supply.

President Donald Trump is apparently contemplating announcing a plan to increase infrastructure spending during his “State of the Union” address he will deliver January 30

The question is where the workers will come from to construct the infrastructure when the evidence is that there are not enough workers in the United States to construct housing.

In this context, Cleveland Fed President Loretta Mester said businesses have been telling the Fed for “quite a while” that they are seeing tightness in the labor market.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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The fundamental value of most cryptocurrencies is likely to be a lot closer to zero or $0.0 than it is to $10,000
value, cryptocurrency, bubble, bitcoin, value
Thursday, 18 January 2018 07:40 AM
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