Chaos and Opportunity in Bitcoin

Bitcoin’s price plummeted Friday, after rumours emerged that South Korea’s government announced would be banning the cryptocurrency.

South Korea isn’t the first nation to consider banning bitcoin, but it could be the most significant. A large portion of bitcoin’s global demand comes from the country. Large numbers of South Koreans were drawn in by last years 1,500%-plus rise.

The South Korean justice ministry said in Thursday’s news conference that, ‘There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges.

The source of this concern? It seems to be the usual grab-bag of issues from crypto detractors. Some are ridiculous, such as arguing that bitcoin is useful for crime, when clearly paper money is as untraceable and useful for criminal transactions, if not more so. Other criticisms could have more substance, such as pointing out that bitcoin could undermine fiat currencies.

Undermining and eventually replacing fiat currencies is, to many bitcoin loyalists, the whole point.

None of this is set in stone, yet. South Korea’s government still has to draft a bill, and pass it through a vote in the National Assembly. This could be over in months, or take years, depending on how determined the government is to get the legislation through. Or how determined any opposition is to stopping it. But whatever may happen, the market is already reacting. Bitcoin plummeted roughly 10% on Thursday. As of time of writing on Friday, the chaos showed no signs of abating.

Bitcoin has seen volatility like this before. And this isn’t the first time that a major government has threatened to ban it. It likely won’t be the last. Bitcoin, and the larger crypto market that it seems to be the flagship for, have survived so far.

Crypto experts argue that it will continue to do so. Money Morning’s own crypto specialists, Sam Volkering and Ryan Dinse, argue that cryptos like bitcoin represent a financial revolution that will remake the world. And the very nature of cryptocurrencies make bans difficult to enforce. Attempts by governments to stop or reverse it could ultimately prove futile.

Years from now, this may be looked back on as an incredible buying opportunity.

But even if that’s true, it won’t prevent the next few years from being a bumpy ride. There can be incredible opportunities in highly volatile markets, along with the incredible risks. Cryptos today perfectly represent the idea of speculative high-risk, high-potential reward investing.

Your humble Money Weekend editor certainly isn’t tipping any money into cryptos that he couldn’t afford to lose. But that doesn’t mean I’m staying out of the market, either. Every time in the past that bitcoin has taken a hit, it’s risen again even stronger afterward. 2017’s incredible gains made bitcoin and cryptocurrency household terms. The controversy won’t end in 2018, but controversy hasn’t ever stopped bitcoin from rising.

For a beginners guide to speculating on the cryptocurrency markets, click here

This week in Money Morning

The US economy has slowly been strengthening recently. Much of the credit for this has gone to US President Trump and his simple, three-part economic plan. Could Trump be smarter than he seems? Late-night Tweets about his own stability and genius aside, it could be true…

Ryan took a close look at the US economy and Trump’s plans on Monday. He asked how long this strength may last. And more importantly, what the long term costs of the current short-term benefits will be. Read the details here.

It’s nothing new to say that Australia’s economy has been driven by Chinese demand. But on Tuesday Ryan looked at another country that could trigger a new boom, bigger and longer-lasting than China’s. One that could benefit early investors immensely if he’s right. To read about what could be the next investment megatrend, you can find Tuesday’s Money Morning here.

As the cryptocurrency trend has exploded, more and more companies are jumping on the bandwagon. An increasing number of these have nothing to do with blockchain, and are just chasing easy money. As Ryan wrote in Wednesday’s Money Morning, when an iced tea company changes its name to something with ‘blockchain’ in it and sees rapid share price gains, something’s wrong. Especially when the company hasn’t actually done anything with blockchain, aside from the new name.

Blockchain as a technology is set to revolutionise dozens of industries worldwide. And cryptocurrencies are already doing so. But Ryan warns that you should avoid the trend-chasers with no real idea. For the details, you can find his article here.

A new investing megatrend is emerging, which Ryan argued on Thursday could be bigger than China’s urbanisation and economic boom. Another nation headed into a massive economic boom, with a huge population eager to lift themselves out of poor, rural lives. Their new opportunities could drive a new boom in international trade and resources. In some ways it could be even larger than China’s. Read why in Thursday’s Money Morning, here.

Returning to cryptocurrencies on Friday, Ryan looked at the headlines that famed investor Warren Buffett has been grabbing. Buffett has been making doom and gloom pronouncements about bitcoin since back when it was at $400. And he doesn’t have much better to say about other cryptos, either. But, successful as he is, Buffett may not be the right person to listen to on cutting-edge tech trends. His track record on tech investing isn’t as great as it is elsewhere.

Does that mean Buffett’s wrong? It’s not that simple. Read why in Ryan’s article from Friday, here.


Tyler Jefferson,
Editor, Money Weekend

Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.

Money Morning Australia