The price of bitcoin exploded overnight, rising from US$6,870 (AU$8,859.21) to US$8,034.17 (AU$10,360) in an hour, according to prices quoted from Coindesk. There’s no one specific piece of news that can be pointed to as being solely responsible for the sudden jump. Instead, it seems that a number of factors came together at the same time.
This week saw the launch of the Royal Commission into the banking industry. Anything that affects the banks is likely to affect the entire Australian share market. The Commonwealth Bank is Australia’s largest company by market capitalisation. Combined, the banks make up a third of our share market. A loss of confidence could be catastrophic.
It was a truly nightmare week on the markets. If you trust the US Fed to be able to smoothly unwind its emergency low-interest rate policy without crashing a market bloated on low rate-driven investment, then you probably aren’t worried. If you don’t have that much faith in the Fed, you might see them as having painted themselves into a corner.
First came the curious. Then as the price rose, the speculators bought in. And in 2017, amidst incredible price rises, massive numbers of new investors bought on the fear of missing out. Those same late-comers have scrambled to get right back out again as the price crashed in January. Their fear of missing out has been transformed into plain old fear.
How you or I feel about the controversial Trans-Pacific Partnership doesn’t seem to matter, though. Questions, comments and protests have all been ignored by governments of all 11 remaining nations. Trump’s America has chosen the route of isolation and protectionism. A short-sighted path that’s usually far more destructive to jobs, and whole economies, than free trade.
Australians, individually and collectively, have bet everything on housing. And every year, we double down on that bet. There’s no certainty that 2018 will be the year our housing gamble goes bust. But it would be madness to be certain that it can’t. Aussie property investors in Australia could be in for a rough year.
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. This isn’t the first time that a major government has threatened to ban it. It likely won’t be the last. Years from now, this may be looked back on as an incredible buying opportunity.
While bitcoin was going through a massive pullback in December, another cryptocurrency was smashing records. This tiny crypto saw a 357% gain in just one month. Its market cap blew through a billion US dollars, and shows no signs of slowing. The problem is, it’s a joke.
As long as the big four can comfortably maintain their positions at the heart of Australian finance, it’s unlikely to change. There’s little competition for the big four, outside one another. But that comfortable position may not be as secure as they think.
Bitcoin may be headed for another correction in 2018. Or it could continue to defy expectations and confound the mainstream. Whatever happens, you shouldn’t be investing anything in bitcoin that you can’t afford to lose...