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BKCM's Brian Kelly: Bitcoin Frenzy Reminds Me of Dotcom Bubble


By    |   Thursday, 07 December 2017 02:14 PM

The bitcoin frenzy right now is like dotcom bubble in 1995, a digital currency hedge fund manager warns.

"If you look at the internet in 1995, that's where you are in digital currencies," BKCM founder Brian Kelly recently told CNBC.

Bitcoin surged past $16,000 for the first time on Thursday, with frenzied demand to trade the cryptocurrency buckling one of the largest exchanges.

Bitcoin, the world’s biggest cryptocurrency, has rallied more than $3,000 in the past 24 hours as mainstream demand for bitcoin explodes. Coinbase said it’s experiencing record traffic that has slowed trading, while Trezor, a wallet service, tweeted that it’s having “minor issues” with its servers, Bloomberg reported.

Investors should be careful of the euphoria that's propelled bitcoin into the stratosphere, warned Kelly, who calls himself a "value speculator" in digital currencies.

"I have no idea if bitcoin is going to be one [to prevail]," he admitted.

"As much as I love bitcoin, an asset that goes straight up, investors have to be careful," said Kelly, author of "The Bitcoin Big Bang — How Alternative Currencies are About to Change the World."

"That being said, there's a massive runway here digital currencies."

Kelly also said he sees greater opportunity in ethereum than bitcoin. "There are thousands of the smartest minds working on building stuff on top of [ethereum]."

Bitcoin listed at $16,103 as of 11:45 a.m. in Bloomberg pricing that is a composite of exchanges. That takes the digital currency’s surge this year to more than 1,500 percent and its market capitalization to $274 billion. Coinbase prices reached $19,697 as of 11:23 a.m. before falling to $16,299 a half hour later. 

The latest rally comes on expectations that new bitcoin derivatives products expected to begin trading this month will boost mainstream demand. Some of the world’s biggest brokerages criticized those plans on Wednesday, telling regulators the contracts have been rushed to market without enough due diligence.

“This is irrational exuberance,” Royal Bank of Scotland Chairman Howard John Davies said in an interview on Bloomberg TV on Thursday. “This is a very, very unusual market, that shows we’re not in a normal two-way trading market.”

Davies agreed with the brokerages’ concerns that exchanges which are set to offer bitcoin futures and options have failed to get enough feedback from market participants on margin levels, trading limits, stress tests and clearing. Those warnings were laid out in an open letter via the Futures Industry Association on Wednesday.

Many market-watchers said the launch this weekend of bitcoin futures by CBOE, one of the world’s biggest derivatives exchanges, was helping drive up the price on expectations it would draw more investors to the market, Reuters explained.

“Futures trading will mean more demand...and is a form of ratification of the underlying tech - bitcoin and cryptocurrencies in general. They are now on the main stage,” said Charles Hayter, founder of cryptocurrency data analysis firm Cryptocompare.

But some are warning that the launch of bitcoin futures, which will allow investors to take speculative “short” positions on the cryptoccurrency, as well as “long” positions, could cause even greater volatility.

“Aggressive traders, such as hedge funds and algorithm-driven funds, (will be able) to use this futures market to enter bitcoin trading with high levels of liquidity for aggressive short-selling and knock the prices really low,” said Think Markets analyst Naeem Aslam.

“Players now have an incentive to be on the short side and make profits hedging against the upside.”

The latest surge brought bitcoin’s “market cap” - its price multiplied by the total number of bitcoins in circulation - to more than $260 billion, according to Coinmarketcap, a trade website. That, in theory, makes its market value higher than that of Visa.

The value of all cryptocurrencies now stands at around $415 billion, according to Coinmarketcap.

(Newsmax wire services contributed to this report).

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The bitcoin frenzy right now is like dotcom bubble in 1995, a digital currency hedge fund manager warns.
bitcoin, frenzy, dotcom, bubble
Thursday, 07 December 2017 02:14 PM
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