I have been watching digital currency every day as part of my daily market watch covering stocks and digital currency that have volatility. Watching volatile price movements has been part of my routine since high school in the 1970’s, and I have a preoccupation with anything where you can keep score. Though I don’t consider myself a great gambler, I am very good at valuing risk in fast moving markets (whatever they may be) with the intention of finding a way to make money. Digital currency is the fastest game in town.
It is a silly preoccupation for the most part focusing on some innate fact about a baseball pitcher and his stats against a particular hitter. I don’t know why, but I have been collecting these facts since I was 12. I looked at an old photo Mom pulled out of my brothers and sisters and me on horseback. I flipped it over and saw that I had written on the back the individual earned run averages of the starting pitchers for the Cleveland Indians that year, 1972. So, there is clearly something wrong with me.
I woke up today and needed to see the top movers in Digital Currency, as I now begin to file the volatility in my head. Digital currency is the most volatile liquid product I have ever observed. These 753 Crypto Coins (another name for digital currencies like Bitcoin and Ethereum) can move 10 -50% every day. Every Day!!!
Below is the chart starting January 2017 showing Ethereum moving from $8 on January 1st to near $400. This is no bubble. I know, as I have seen bubbles. All digital currency will have volatility, of course, but this is telling us something completely different. Prices will move up and down, but the most important emerging markets in the world are in these 753 currencies.
This means you can lose 50% of your investment on any given day, and with this risk comes reward: Bitcoin and Ethereum have exploded in a remarkably short time. This time last year, Bitcoin was $450 (now $2608), and Ethereum was $38 (now $374) and those who did not participate and are discovering these facts. There are many Digital Currencies (753 today and will be 1,500 in a year), and they move like no other commodity in history – and I have been watching prices since I was sitting on a horse in my front yard in 1972, 45 years ago.
Something unusual is happening, and I believe it is the first step in a series of radical changes that will affect the way we pay for things. Right now Bitcoin, Ethereum and other digital currencies are exploding in price, but soon they will settle in as the slow moving default units of measure as other new currencies take their place as the currency du jour in our social media world of Facebook, Instagram, Twitter and LinkedIn.
In 3-5 years you will not be driving your car, and you will not use cash. A $10 bill will be a collectible relic of the past like a Coca Cola bottle. The dramatic change in the way we spend money is the reason digital currencies are volatile now. There can be no other reason. Now the trick will be to determine if these are undervalued or overvalued.
You can email me, and I will send you links so you can watch these yourself (which I always suggest you do). Paying attention here to the evolution of digital currency is the most important decision you will make for your future investment life. Historical investment decisions are behind you, and the change in a unit of measure to pay for goods and services is ahead of you, unfolding in a kaleidoscope of digital currency.
Steve Kanaval is a longtime portfolio manager, currency trader and market watcher. You can email Steve directly at email@example.com.
Photo attribute Shawshank Redemption