crypto currencies

Cryptocurrencies are plummeting – where will it bottom out?

What was lauded in many places as the future of money some twelve months ago now threatens to vanish into irrelevance. We are talking about cryptocurrencies here. While market capitalisation of all existing representations of such currencies amounted to around USD 835bn last January, only just over USD 120bn remains now – a decline of around 85%. Market leader Bitcoin came dangerously close to the USD 3,500 threshold at the start of the week. Going from the historical high of USD 20,000 in December 2017, the cryptocurrency pioneer has thus lost around 80%. The business model behind the respective cryptocurrency does not appear to be playing any major role in the price collapse. Ripple, the currency for the banks’ payment networks and the segment’s number two, eased by 87% compared with the highs reached at the turn of the year. The Bitcoin offshoot “Bitcoin Cash” slumped by as much as…

Speculative excesses at Bitcoin & Co.

The Bitcoin share price has risen by around 45 per cent since 2012. Another 1,000 other crypto currencies have been created. Everything suggests a bubble is forming. Blockchain has the potential to make business processes and payments safer, faster and cheaper. But it is completely uncertain whether such “crypto currencies” will survive in the long term and if so which. Investors should stay well away from Bitcoin & Co. Their share price performance looks more like an auction than a fair pricing process. Regulation by the supervisory authorities is probably only a question of time.     What is a speculative bubble? – Many capital market researchers and Nobel prize-winners have worked on this question without having developed a viable early warning system. But we believe there are some empirical features that have characterised previous speculative bubbles. These include the fact that valuation is not possible using traditional methods: “this…