Former Fortress hedge fund manager Michael Novogratz says the $8 billion Valuation of Coinbase Proves Cryptos are Not ‘Tulips’.
Novogratz, whose cryptocurrency-focused merchant bank Galaxy Digital went public on a Canadian stock exchange in August, predicted major institutional money in bitcoin by next year.
“You’re going to see pensions and endowments come in, or I will literally come back next year, and wear no shoes,” Novogratz said.
No Shoes?
What a joke. How about no clothes in a march down Times Square?
Clothing aside, Novogratz presented the silliest argument imaginable as to why cryptos cannot be in a bubble: Price
By the exact same rationale, someone could have made this claim “Tulips are not in a bubble because someone agreed to pay $10,000 (or whatever) for a bulb”.
In 2000, one might have stated “Global crossing is not in a bubble because people believe in the valuation.” The company went to zero.
Reflections on Price
Price can never offer proof that something is not in a bubble. Rather, it’s the opposite. Absurd valuations can and do suggest bubbles are in place.
I do not even believe Novogratz believes what he said. Rather, I view his statements are a stunt.
But who knows? There are lots of fools who made a lot of money and lots of brilliant PhDs who didn’t.
Mike “Mish” Shedlock
Have you not read of several U.S. financial institutions implementing the Ripple solution for cross border transactions? Oh sure, they can use SWIFT and it takes only days. Or XRP in a fraction of a second. There’s something.
And should Amazon adopt a digital currency for transactions on its website, would it not create shock waves?
Look, it takes a generation for systemic change to work its way through a culture and an economy. We’re yet in the early days of crypto currencies, and it’s far from “inconceivable” that they will become part of our daily lives. In fact, it’s pretty damn easy to imagine electronic currency beating the hell out of fiat currency as a superior form of money this century. It’s easy to be dismissive of a new, potentially disruptive technology that has yet to unseat the old way of doing things. But neither I nor Mish knows whether, when and how it will play out, so calling it a bubble before it crashes is as speculative as the crypto currency he dismisses.
Remember that entirely unprofitable firm that just burned money for more than a decade just to gain more marketshare at a loss, what did they call it? Oh yeah, Amazon. Had it failed, all the naysayers would have been right, it was a bubble. But it didn’t fail. The crypto story is still young. So yes, I’ve taken a long position with play money that I can afford to lose. Time will tell.
Cross border financial transactions, at least Canadian-US banking transactions, are completed same day. I’m thinking that this would hold true in dealing with most countries with a modern banking system.
Belisarius6:
In theory, the supply constraint on an individual crypto currency makes them superior to fiat currencies. However, there is no supply constraint on creating crypto currencies. As of today, CoinMarketCap is tracking prices on 2,023 different crypto currencies.
Bitcoins are also worthless in the long run like internet stocks with little revenue and no chance of profits were.
Internet currently has an overload of information and most of information is worth less due to that and there is so much crap or distorted information it is just sad.
Quality information like some financial blogs including Mish will rise in value because there is value in reality based information that is useful.
The value of Facebook is based in wholesale abuse of their customers information so Facebook has a huge regulatory catastrophe hanging over it and Zuck makes it more and more likely there will be regulation to stop the abuse of customers information and therefore crash Facebooks profits because Facebook and now instagram and Whatsapp are constantly pushing the envelope the keep profits flowing and goose the Facebook stock and also treating Conservatives like crap while giving unhinged and hateful democrats, socialists and antifa-fanatics a pass.
Facebook has created a massive bubble among the democrats, extreme liberals, socialists and all kinds of fanatics so the destruction of American politics as exemplified by the witch hunt of witch hunts against Kavanaugh is partly the result of Facebook and other Social media.
There is same kind of bubble also with conservatives so both sides are becoming more extreme.
Facebook itself is already on a downward slope but Zuck is keeping the profits flowing by abusing the users of Instagram and Whatsapp more and more including now using all data people give it in all three (Facebook, instagram, Whatsapp) together to track and analyze and target ads at users.
If you use Facebook, Instagram or Whatsapp YOU are the product and now they are even getting transaction data from creditcards through merchant processing networks and Facebok app or Instagram or Whatsapp on your phone is 247 tracking of everything you do.
Google is no better because Android, Chrome, Gmail, Youtube and all websites with Adsense or Doubleclick on them are together as bad as facebook is.
All cryptos are essentially worthless, even Bitcoin.
In the future people will be told about the tulip bubble and the crypto bubble under the same heading of “unsustainable speculative manias”
Bubble, all bubble, nothing but bubble: Think Enron and Bernie Madoff, 1999…before the fall. This bubble differs only in that, at it’s core, lies the cost per cycle of running a string of bits through ALU, (your computer’s Arithmetic Logic Unit). While this actual cost has been dropping exponentially for decades now thanks to Moore’s Law and Yankee ingenuity, the Crypto craze would have us all believe it’s going in the opposite direction.
I’m not advocating piling in because Bitcoin will have extreme volatility and could easily go to zero if it does not become the standard for blockchain settlement, but the value of an information “commodity money” does not have a cap like shares in a company or a physical asset which is limited by decreasing returns to scale.
Internet stocks were a bubble but had you been able to invest directly in the internet itself, the value of that has grown exponentially because information grows in value the more it is used (increasing returns to scale).
Bitcoin is an information-based commodity-money. If it becomes the money used to settle commerce on distributed-ledgers and smart-contracts this valuation will not be a bubble. If this tech is built around a different info commodity money then btc goes to zero.
However the vol between here and there will be enormous and any investor will go bankrupt trying to chase that dragon.