By: Jack Rasmus Published 12 December 2017
Is Bitcoin the new ‘Subprime Mortgage Bond?’ Just as subprimes precipitated a crash in the derivative, Credit Default Swaps (CDS), at the giant insurance company, AIG, in September 2008, setting off the global financial crash that year—will the Bitcoin and crypto-currency bubble precipitate a collapse in the new derivative, Exchange Traded Funds (ETFs) in stock and bond markets in 2018-19, ushering in yet another general financial crisis?
The U..S and global economy are approached the latter stages in the credit cycle, during which financial asset bubbles begin to appear and the real economy appears to be at peak performance (the calm before the storm). This scenario was explained in my 2016 book, ‘Systemic Fragility in the Global Economy.’ And in my follow-on, just published August 2017 book, ‘Central Bankers at the End of Their Ropes’, I predict should the Federal Reserve raise short term U.S. interest rates another 1 percent in 2018, as it has announced, that will set off a credit crash leading to Bitcoin, stock, and bond asset price bubbles bursting. How likely is such a scenario?
Is Bitcoin a Bona Fide ‘Bubble’?
What’s a financial asset bubble? Few agree. But few would argue that Bitcoins and other crypto currencies are today clearly in a global financial asset bubble. Bitcoin and other crypto currencies are the speculative investing canary in the global financial asset coalmine.
One can debate what constitutes a financial bubble—i.e. how much prices must rise short term or how much above long term average rates of increase—but there’s no doubt that Bitcoin price appreciation in 2017 is a bubble by any definition. At less than US$1000 per coin in January, Bitcoin prices surged past US$11,000 this past November. It then corrected back to US$9,000, only to surge again by early December to more than US$15,000. Given the forces behind Bitcoin, that scenario is likely to continue into 2018 before the bubble bursts. Some predict the price for a Bitcoin will escalate to US$142,000, now that Bitcoin trading has gone mainstream on the CME and CBOE, and offshore, commodity futures exchanges.
The question of the moment is what might be the contagion effects on other markets?
What’s Driving the Bitcoin Bubble?
If Blockchain and software tech company ICOs are driving Bitcoin and other crypto pricing, what’s additionally creating the bubble?…..Who is buying Bitcoin and cryptos, driving up prices, apart from early investors in the companies? ……