The price of bitcoin (BTC) crossed $29,000 Wednesday evening for the first time ever, pushing further into record territory after hitting what had been an all-time high earlier in the day.
Bitcoin is currently on its longest winning run since 2019. Bryan Routledge, Associate Professor of Finance at the Tepper School of Business, Carnegie Mellon University, joins Yahoo Finance Live to break down how Bitcoin rallied to record levels this year and the outlook for crypto in 2021.
Video Transcript- Bitcoin at a record once again. It touched above 28,000 overnight. And it has had quite a run thus far in 2020. Hasn't had the end pullback that we saw, for example, in 2017. Let's talk more about what could happen next for Bitcoin as well as for the bigger cryptocurrency complex.
Brian Rutledge is joining us now. He's an Associate Professor of Finance at Carnegie Mellon University Tepper School of Business. He has written a lot about cryptocurrency, but about blockchain as well.
And it's actually there, Brian, that I want to begin because as Myles my co-host has pointed out frequently, the blockchain conversation is definitely not as prominent now as it was in 2017. The focus has really come in on Bitcoin and its rise. Do you think that that's sort of a mistaken perception? Do you think that there is still-- I mean, is-- is blockchain out there? Is-- how much is it being used? And what's sort of the use case as we move forward?
BRIAN RUTLEDGE: Wow. OK. Lots packed in there. I think the-- the thing-- the thing to appreciate about Bitcoin and its rise in price-- I mean, 28,000 is remarkable. 3,000 was remarkable for Bitcoin in the sense it is built on blockchain technology. And so I think the fact that you're not talking about it is, in some sense, an acknowledgment that blockchain technology is effective. So it is big dollars that are in Bitcoin that are built on this underlying-- underlying blockchain technology of competitive decentralized recordkeeping.
And if you had asked me in 2013 if this was going to be viable, I certainly wouldn't have said yes. And so I think the-- some of the price of Bitcoin is a bit of a mystery in the sense of why it has quadrupled over the year. But the fact that it is what it is I think is a validation that the blockchain technology is real and effective.
And then the second half of your question, I think, is, what's the sort of killer app for blockchain technology that's waiting to happen? I think that is still unanswered. And it is a very good question in the sense of, where will blockchain technology go beyond just, say, record keeping on who owns Bitcoin?
- You know, Brian, the perspective that I have on Bitcoin is basically from Finance Twitter and public media, so it's everyone bragging about how smart they are because they own all these coins and they went up a lot. I'm curious how your students-- what your conversations with your students are like as it relates to the entire crypto space, what they're interested in right now.
BRIAN RUTLEDGE: I mean, it is-- an awesome thing to put on your syllabus is cryptocurrency, blockchain technology. You just-- you track students. It is-- I think it's a really interesting and attractive thing for a student in the same way it's an interesting, attractive thing just in general in the sense of, it is a mashing up of economics and business with the underlying technology of cryptography and distributed computing.
And so there is really interesting technology problems that are there. And then, there are really interesting business problems. And so it-- it-- it's a rich, fun topic to teach because the students are just-- they're keen.
- Brian, just based-- based on your understanding of Bitcoin and its history and where it's been this year, do you think what we're seeing in terms of price action reflects that at some point in our lifetimes, Bitcoin might be a viable replacement to the dollar?
BRIAN RUTLEDGE: That's a good question in the sense of, what is it people are buying Bitcoin for and the sort of speculation? But the two things that people might be thinking about-- one is it's an alternative to something like gold. And we think about-- gold is not sort of an alternative to the dollar, but people hold it in their portfolio as, say, a hedge against inflation. We don't use gold in our everyday transactions.
The price of gold is much higher then the intrinsic value of gold you would find. And so people moving into cryptocurrencies or Bitcoin as a, here is something that is commodity-like that is independent of, say, the Federal Reserve, and I want to hold that as a hedge against inflation. That-- that-- that is not a-- that's a sensible argument. It's belayed a bit by the fact that the price of Bitcoin is stunningly volatile. It's orders of magnitude more volatile than the price of gold or even the stock market.
And then, I think the second sort of reason that people might think about Bitcoin as something they want to own is, it is perhaps access to this blockchain technology in the sense of, I want to own a piece of this future technology. And there, I think-- you know, like all bets, it's risky.
And the bet there is twofold. One would be that blockchain technology indeed will be something new and useful. And then the second part of that is that Bitcoin would be relevant in that, I don't know, blockchain-enabled future.
And I guess-- when thinking about that one, if you go back to, I don't know, the internet in the 1990s and thinking about, gee, I want to-- I think this is going to be revolutionary, it was pretty hard to see where the internet was going, and harder still to pick, I don't know, Amazon over Pets.com or Netscape or somebody.
- Yeah. And most people-- a lot of people didn't do that correctly, certainly. I mean, but speaking of forecasting, Brian, you received a grant from the International Institute of Forecasters for your work on forecasting. When it comes to Bitcoin price, is there any way to even do it with any degree of accuracy?
BRIAN RUTLEDGE: The financial prices in general are hard to forecast in part because everybody is trying to forecast them, so the famous or book of Burton Malkiel of a random walk down Wall Street is still applicable in the sense that, for the most part, prices go up or down with almost equal probability per day. There's lots of people trying to sort of find some wedge of a signal in there to predict the price of Bitcoin.
The-- the-- if you do have some-- so, no. I have no forecasting ability. If you think you have some forecasting ability, Bitcoin prices are attractive in the sense that they are just so volatile, right? And if-- if you think you can forecast something, predicting, forecasting something that's volatile lets you make a lot of money.
- Yes, it does. And a lot of people certainly have done that even if their forecasts have been wrong. So we'll see what happens next year. Brian, thank you so much. Happy new year to you, and we'll see what ends up happening with those Bitcoin prices.
Brian Rutledge is an Associate Professor of Finance at Carnegie Mellon's David Tepper School of Business. Thank you so much.
After tearing through $27,000 for the first time ever only a few hours before, the price of bitcoin briefly surged past $28,000 Sunday morning as the leading cryptocurrency’s recent meteoric rise continues. BTC’s market value now exceeds $500 billion.
Goldman Sachs on Bitcoin, Gold, Copper, and Inflation HedgeJeff Currie, global head of commodities research at Goldman Sachs, revealed his outlook for bitcoin, gold, and copper on Thursday. Commenting on the recent surge in bitcoin’s price, he said on Bloomberg Markets that looking at its price chart, bitcoin looks “very similar” to copper. “What do they have in common?” he continued:
They are both risk-on growth proxies, and I would argue that bitcoin is the retail inflation hedge.
Goldman Sach’s strategists led by Currie also wrote in a note on Thursday that “Gold’s recent underperformance versus real rates and the dollar has left some investors concerned that bitcoin is replacing gold as the inflation hedge of choice.”
The strategists primarily attributed the recent decline in gold’s price to a coronavirus vaccine-driven investment strategy that led investors to buy riskier assets, rather than abandoning gold on the basis of its diminishing value.
Currie emphasized that gold is a defensive asset and “there’s really no evidence” that BTC “stole demand from gold.” Goldman Sachs’ analysts wrote:
We do not see bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort … We do not see evidence that bitcoin’s rally is cannibalizing gold’s bull market and believe the two can coexist.
Some analysts, including those at JPMorgan Chase, disagree with Goldman Sachs, however. They believe that investors are moving money out of gold investments into bitcoin. Some companies have also scaled down their gold exposure to purchase bitcoin to hedge against fiat currency devaluation, including British asset manager Ruffer.
Do you agree with Goldman Sachs about bitcoin and gold? Let us know in the comments section below.
JPMorgan’s analysts have warned about the odds of a bitcoin correction which would increase if the flows into Grayscale’s bitcoin trust slow significantly. The analysts indicated that bitcoin is “overbought.”
JPMorgan Reveals Bitcoin’s OutlookThe analysts at JPMorgan Chase & Co. gave their bitcoin prediction in a note on Friday. They explained that flows into Grayscale’s bitcoin trust are key to the outlook of the cryptocurrency, Bloomberg reported Monday. According to the publication, the analysts believe:
The odds of a bitcoin correction would increase if the flows into the world’s largest traded cryptocurrency fund slow significantly.
The JPMorgan analysts further indicated that bitcoin was likely “overbought” after the recent rally. They clarified that the flows into the Grayscale Bitcoin Trust “are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics.” They emphasized that “a major slowdown in those flows would boost the risk of a bitcoin correction akin to the one in the second half of 2019,” the news outlet conveyed.
Grayscale Investments has about 15.7 billion in assets under management as of Dec. 21, with its bitcoin trust leading the pool with more than $13.34 billion. Inflows into the fund are running at about $1 billion per month, the JPMorgan analysts noted.
Institutional investors are increasingly interested in bitcoin. The firm previously stated that investors had been moving their money from gold exchange-traded funds (ETFs) into Grayscale’s bitcoin trust. Following a $100 million investment in BTC from insurance giant Massmutual, JPMorgan said that they anticipated a $600 billion demand for bitcoin.
What do you think about JPMorgan’s bitcoin prediction? Let us know in the comments section below.
At 0.02 cents, the humble satoshi still has a long way to go to hit parity with the cent, let alone an entire dollar.
Bitcoin (BTC) may be circling all-time highs, but a new storm is brewing around its smallest subunit, the satoshi or “sat.”
As more first-time investors pile in to BTC, attention is once again highlighting the fact that many still think Bitcoin cannot be divided and is “too expensive.”
Buy Bitcoin? Too expensiveA frequent point of debate throughout Bitcoin’s recent history, the problem of how to solve this misconception and introduce sats to a wider audience is now back in the spotlight.
This week, statistician Willy Woo publicly approached listings site CoinGecko with an appeal to make the tiny satoshi more visible.
“Put up a smaller unit as the default on BTC on your site and see if it catches on. Let’s start a trend,” he offered.
Woo was responding to an experience from Magic Internet Money podcast host Brad Mills, who had been told by a prospective buyer that they could not afford an entire Bitcoin.
A long way to parity?Satoshis are the smallest original subunit of Bitcoin, which is divisible by up to eight decimal places. At current prices, this makes a single satoshi worth around 0.02 cents. One dollar is worth 43 sats.
A dedicated resource now shows how much BTC/USD must gain in order for the one sat to equal one cent. For this to happen, Bitcoin would need to challenge the United States’ M2 money supply cap, Woo said — Bitcoin would need to hit $1 million.
Bitcoin money supply measured in U.S. dollar equivalent value. Source: WoobullAgainst that backdrop, a $23,000 Bitcoin price still seems modest. Nonetheless, some currencies have already fallen to satoshi parity of their own accord. In July, the Argentinian peso joined the Lebanese lira in seeing one sat equal their smallest unit of account.
He further noted that beyond sats, so-called “millisats,” which exist on the Lightning Network, could be used should the need arise. Lightning remains the most widely-accepted best bet for Bitcoin scaling, and advances in its user experience will allow entry-level Bitcoiners to send tiny payments for next to no fees in the future.
This is achieved by performing transactions off-chain and syncing them later, avoiding the need for miner fees and congesting the Bitcoin blockchain.
New York (CNN Business)Bitcoin has blown past the $20,000 mark and continues to hit record highs as investors flock to the cryptocurrency during the coronavirus pandemic.
After topping the symbolic benchmark Wednesday, bitcoin continued to surge late into the evening. It was last trading at roughly $21,851, according to data provider Refinitiv.
Bitcoin (XBT) has been on a tear this year, having tripled in value. It and other cryptocurrencies have been attractive to investors as the US dollar has weakened.
"It's not a surprise to us that Bitcoin has hit $20K but it is a very symbolic threshold to reach at the end of what has been a historic year for bitcoin," said Michael Sonnenshein, managing director of Grayscale Investments. "These are just the early days, and we think there's a lot more runway to go."
With the Federal Reserve expected to leave interest rates near zero for several more years, bitcoin may continue to win new fans.Well-known names are adding to bitcoin's mainstream appeal. A top executive at BlackRock (BLK) has even said the cryptocurrency can replace gold, and payments giants Square (SQ) and PayPal (PYPL) have both embraced bitcoin.
"Volumes last week were 70% above the year daily average ... suggesting greater participation in this rally than has historically been the case," said James Butterfill, investment strategist at CoinShares. "It is worth taking note that investors are beginning to see bitcoin as a viable gold alternative."