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Bitcoin is Imploding? What’s Next?

Sigma Investment Counselors

November 28, 2018

With bitcoin down 80% from the peak, and similar declines for other cryptocurrencies, what’s likely to happen next?

We have previously commented on the cryptocurrency phenomenon, see Coin of the Realm, posted 16 Feb 2018 and Tulips and Bitcoins posted 16 Aug 2017.

We have been somewhat less than enthusiastic regarding the investment merit of cryptocurrencies, largely because there does not appear to be any recognized valuation metric.  While crypto bulls like to cite the many uses they perceive for digital money and the underlying technology, there does not seem to be any reason for a correlation between the theoretical utility of this concept and the price of individual coins.

Bitcoin bulls have also pointed to the limits on supply as a positive factor.  However, while the total number of bitcoins may be limited, it is clear that there are no limits on the number of imitators.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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