Why Currency Analysts Can’t Understand Bitcoin’s Rise

If you ask a dozen people about bitcoin, you’ll probably get a dozen different opinions on the red-hot cryptocurrency. And none of them may prove to be correct.


Even the most seasoned currency experts are scratching their heads. As Bloomberg reports, Wall Street currency analysts are having trouble wrapping their heads around bitcoin and other cryptos, wondering if bitcoin is the millennial version of gold, some kind of collectible, a massive bubble, or something else:
For foreign-exchange analysts trying to use traditional methods to value the so-called cryptocurrency and its digital cousins, it may be all of the above — but it’s not quite a currency.
“It is difficult to use standard FX valuation frameworks that are based on the fundamental drivers of the currency, like relative productivity, or terms of trade of the country, because there are no such concepts,” said Juan Prada, a New York-based currency strategist at Barclays Capital Inc.
While they’d probably like to simply stick to traditional currencies, that’s no longer an option. The cryptocurrency market, which recently ballooned to over $100 billion in total value, is too large to ignore.
A new valuation model is probably needed to understand bitcoin. It and other cryptos are extremely volatile, and while they can be used in some places to purchase goods and services, their decentralized nature clearly separates them from being strictly currencies.
That makes them more like gold — a commodity — than a currency. In fact, the U.S. Commodity Futures Trading Commission officially declared cryptos commodities back in 2015, in a move likely aimed at becoming the defacto agency to regulate trading of crypto options and futures down the line.
The world of cryptocurrencies is extremely new, and even the biggest experts in the field can’t predict what the future holds. But as time goes on, and public interest skyrockets so too does the likelihood that bitcoin will stick around for the long haul.
That means Wall Street analysts better start brushing up on their blockchain knowledge.
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