Bitcoin Chasing $10,000 on FOMO
The Bitcoin phenomenon hit new heights over the weekend and a new surge saw its price top $9700 in trading early this morning. Unless markets take fright today it seems almost certain that the cryptocurrencies poster boy will strike the symbolic $10,000 level seen as critical to its future at some point this week, possible in the early part.
Bitcoin has been on a rampage all year but the past month, since the October 31st announcement by the Chicago Mercantile Exchange that it was applying to the regulator to start offering Bitcoin futures, has been particularly giddy. In January a single unit of Bitcoin could be bought for around $1000 and on October 30th for just over $6100. The latest jump saw Bitcoin move from $8000 to $9000 in just 7 days, with momentum seemingly unstoppable.
The inevitable ‘tulips’ clichés, referencing the first know commodities ‘bubble’ when the price of tulip bulbs soared in the 17th century, only the just as quickly crash, have been quick to be trotted out by traditionalists. Whether or not what we have seen over the past year, and weeks, is a bubble, and it may well be, is a deeper question. And even if Bitcoin’s price is currently in bubble territory and a major correction is impending, the cryptocurrency has already shown the staying power to absorb and come back from price crashes.
We’ve already seen two major corrections this year that Bitcoin has recovered from and moved on quickly to greater heights. In March, after Bitcoin hit $2500, its price promptly shed 30% to $1900 and in September, when the $5000 landmark was reached, a 20% correction immediately followed. It remains to be seen if hitting another ‘round-number’ psychological landmark at $10,000 will also trigger a fall. A lot will depend upon on how big it is.
The CME futures development, with other major exchanges are also now said to be looking at offering Bitcoin, was certainly the major catalyst to the most recent price rally. Goldman Sachs said last month it was looking at setting up a trading operation for digital currencies. However, it appears that this has led to another subsequent catalyst that was this weekend succinctly surmised by the ‘text-speak’ abbreviation FOMO – Fear of Missing Out.
An interesting stat mentioned in the Wall Street Journal shows that 100,000 new accounts were opened on Coinbase, the largest cryptocurrencies exchange in the U.S., between Wednesday and Friday last week. The new account holders are thought to be investing online in Bitcoin, most with relatively modest sums, as a hedge grounded on FOMO. The motivation of many buyers appears to be ‘Bitcoin may be a bubble, but if it’s not we don’t want to have missed out, so let’s invest a few hundred’. Charles Schwab, one of the biggest online stockbrokers in the U.S. has 10.6 million active user accounts. Coinbase now has 13.1 million, though the average value of each account is significantly less.
Different schemes are also popping up promoting Bitcoin and cryptocurrencies investing for beginners, helping less computer literate individuals invest in cryptocurrencies, often at a significant premium to actual market prices. Anyone who is considering a flutter would be better off asking a tech-savvy relative or friend to help them buy on an exchange rather than investing via these kinds of pop-up scheme cashing in on the frenzy.
Whatever the future holds for Bitcoin, and no one really knows, what happens when it hits $10,000 will be the next big landmark event in the cryptocurrency’s journey.
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