The Buzz

All markets and investing news all the time

Bitcoin is back! Price surges again

May 29, 2014: 12:35 PM ET
Follow the bouncing Bitcoin. The price has rebounded lately after a panic sell-off this spring.

Follow the bouncing Bitcoin. The price has rebounded lately after a panic sell-off this spring.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

Stop those funeral dirges for Bitcoin. The virtual currency is not dead.

In fact, the price of Bitcoin on Bitstamp, one of the leading Bitcoin exchanges, is up more than 30% in the last two weeks! And it has shot up about 55% since hitting its lowest point of the year in mid-April.

bitcoinprice

What's Happening!! (One of the most underrated 70s sticoms by the way. "No Roger. No Rerun. No Rent." And check out that awesome theme song!)

Simply put, Bitcoin prices probably fell too far earlier this year due to fears about the currency's future following the bankruptcy of the once mighty Mt.Gox exchange as well as concerns regarding China and Russia cracking down on Bitcoin adoption.

Related: Here's why Bitcoin matters

All those bad headlines about bitcoins being used on illegal marketplaces like Silk Road for buying drugs and assassins for hire didn't help either. Nor did the media circus that was the O.J. Simpson-esque chase of the "is he or isn't he the creator of Bitcoin?" Dorian Satoshi Nakamoto.

Ashraf Laidi, chief global strategist and currency expert with City Index Ltd in London, said there definitely was a "panic" in the Bitcoin market this spring. He thinks that there are several good reasons to explain the rebound.

For one, Bitcoin and other virtual currencies like Dogecoin (which even sponsored a NASCAR driver this year thanks in part to donations from Reddit users) are still gaining in popularity.

The next Reddit campaign? Get the Dogecoin car into Disney/Pixar's Cars 3. Ka-chow!

The next Reddit campaign? Get the Dogecoin car into Disney/Pixar's Cars 3. Ka-chow!

Influential tech analyst/venture capitalist Mary Meeker, who became a Wall Street rock star at Morgan Stanley and now works for Kleiner Perkins Caufield and Byers, devoted a slide to the explosion in the number of Bitcoin wallets in her latest Internet Trends report. (Meeker unveiled the report Wednesday at the Re/code CodeCon conference.)

kpcbbitcoin

Click on the chart for Mary Meeker's full Internet Trends slide show.

The allure of anonymity that Bitcoin offers gets a lot of attention in the press. And it feeds the notion that Bitcoin is just for those with unsavory and/or illegal tastes.

But let's be honest, relatively low transaction fees are a big draw too. Saving money may be the bigger reason why more consumers are creating Bitcoin wallets, not some desire to have their financial history hidden from the proverbial "Man" or "Big Brother."

Related: Now you can use Bitcoin to buy a smart rifle

Major businesses are starting to notice that too.

Satellite TV company DISH Network (DISH) announced Thursday that it would begin accepting bitcoins for bill payments in the third quarter.

DISH joins a growing list of companies that have started to embrace Bitcoin, including online retailer Overstock. com (OSTK), FarmVille owner Zynga (ZNGA) and Sir Richard Branson's Virgin Galactic space tourism firm.

Still, it's important to remember that Bitcoin is in its infant (maybe toddler if you want to be charitable) stages. There will be more growing pains for the currency and more big moves up and down in price.

Leigh Drogen, CEO of Estimize, a site that crowdsources earnings and sales forecasts from a wide group of investors, remains a fan of Bitcoin. I spoke with him back in October about the currency.

At the time, he owned one Bitcoin. He still owns it and he said that the best thing for investors who believe in the long-term potential for virtual currencies to do is ignore the daily volatility.

"The price is not the most important thing when it comes to Bitcoin. It's how often it is being exchanged and how much is being purchased," Drogen said. "There are times when the price will get out of whack because there is a finite amount of bitcoins out there."

Related: Bitcoin OK for politics ... but with $100 limit

That's a great point that bears repeating. Governments don't print bitcoins. The currency is "mined" via complex mathematical transactions, and there is an algorithm in place that controls the amount of bitcoins on the market. And that number is finite.

There will never be more than 21 million bitcoins available. There are currently 12.8 million in circulation, according to Bitcoin wallet and data site Blockchain.

So in that respect, bitcoins are more like stocks than currencies. Because central banks can always issue more paper money, the value of dollars, euro, yen, etc., remain relatively stable over time. But with Bitcoin, there will often be times when demand vastly outstrips supply. Or vice versa.

Laidi adds that for a certain element of investors who had been flocking to gold as a safe haven hedge against inflation, Bitcoin is now more attractive.

Related: Where is Bitcoin legal?

Gold, like Bitcoin, has tended to perform well during times when investors fear that central banks may be devaluing their currencies with easy monetary policies. See "Reserve, Federal" or "Japan, Bank of" for recent examples.

There's also the fact that the venture capital world is taking Bitcoin very seriously. Sure, the VC community doesn't have a perfect track record. But in addition to Meeker's endorsement, heavy hitters like Fred Wilson's Union Square and Andreessen Horowitz both back Bitcoin wallet Coinbase.

So is Bitcoin dead? No. Does that mean that Bitcoin should be worth a lot more than its current price? Maybe. Maybe not.

But I agree 100% with Drogen. Don't obsess about the price. Don't treat Bitcoin as a short-term trade. What is most exciting about Bitcoin is the potential for it to truly be an alternative form of currency, not whether or not Bitcoin should be worth $50, $500 or $5,000.

Reader Comment of the Week! My column on the rotten state of Whole Foods (WFM) stock has turned out to be one of my most popular. I think that this is a company consumers either love or love to hate. Either way, it's an easy target for jokes about the hipster nature of organic food. And that's why Aaron Levitt is this week's Reader Comment of the Week winner.

Congrats, sir. Your second ROCTW award this year. Do @BostonBroker33 and @LifeSciencesMkt have to watch their backs?

  • Time for market panic? Depends who you ask...

    It should be another good year for the stock market. Not spectacular, but positive.

    That's the general consensus among the investment strategists CNNMoney polled in a recent survey. See the full results here.

    Of course, some were more bullish than others, and one was downright bearish.

    Gary Flam, a portfolio manager at Bel Air Investment Advisors, had the lowest target for the S&P 500 among the 26 investment professionals in CNNMoney's survey. He MORE

    - Apr 8, 2014 8:38 AM ET
  • Has Tesla finally bottomed? Maybe?

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    Good news for Tesla investors! You don't need as many bitcoins to buy the electric carmaker's stock as you did just a few months ago.

    Okay. I'm being sarcastic ... which is par for the course MORE

    - Nov 19, 2013 1:19 PM ET
  • The strangest bull market ever

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    This bull market is really odd. The Dow and S&P 500 are near all-time highs. The Nasdaq is inching closer to 4,000 for the first time since the tech bubble did its best weasel impersonation MORE

    - Nov 14, 2013 1:52 PM ET
  • Bitcoin mania is back! But is it a bubble?

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    Remember that Bitcoin bubble? The price of the virtual currency rose as high as $266 in early April when everyone was worried that problems with banks in Cyprus could lead to a huge euro disaster.

    The MORE

    - Oct 24, 2013 1:48 PM ET
  • I lost $50,000 in Bitcoin crash, but I'm still a believer

    At the start of the year, Simon Lang was about $1,000 in the hole on his initial Bitcoin investment. But as the price of the digital currency ballooned to an all-time high of $266 last week, Lang found himself $60,000 richer.

    But that didn't last very long.

    As Bitcoin prices tumbled to around $50 earlier this week, the value of his stake shrank to about $11,000.

    "I was surprised at how fast the price went MORE

    - Apr 18, 2013 6:43 AM ET
  • Bitcoin bubble begins to burst, price plunges 60%

    It may be the beginning of the end for the Bitcoin bubble. The price of the virtual currency, which has increased almost 20-fold this year, plunged 60% Wednesday in the span of just five hours.

    Bitcoin prices hit a high of $266 earlier in the day before dropping as low as $105 in choppy afternoon trading. It later bounced back to about $145, but that's still about 45% below the high.

    The currency, MORE

    - Apr 10, 2013 4:17 PM ET
  • Bitcoins are a bubble

    First there was Tulip Mania. Then there was the dotcom craze. And let's not forget the run-up in housing prices. The newest bubble on the block is in Bitcoins, a 4-year-old virtual currency that has already increased ten-fold this year. And like all other bubbles, this probably won't end well for any investors who jump in way too late.

    Prices have nearly doubled during the past two weeks, and show no MORE

    - Apr 5, 2013 6:52 AM ET
  • The Bitcoin trade: Higher, Higher, Higher!

    Bitcoin -- the 4-year-old cryptic online currency -- is suddenly the hottest investment in the world. What other currency, stock, bond or derivative has seen its value spike 326% in the past month and 67% in less than a week?

    On Wednesday, one bitcoin traded for $147. Just two and a half years ago, a bitcoin was valued at 5 cents.

    The banking crisis in Cyprus certainly contributed to the interest in MORE

    - Apr 3, 2013 1:46 PM ET
Fear & Greed
Sponsored by

To view my watchlist

Not a member yet?

Sign up now for a free account
Stupid Stock Move of the Day
#StupidStock Move of the Day! $FEYE up 7% because of $SNE? Yes. It's a cybersecurity company. But has history of losses and sales misses.
Powered by WordPress.com VIP.
Follow

Get every new post delivered to your Inbox.

Join 242 other followers