With the introduction of Bitcoin futures trading last Sunday, some people including Jim Cramer thought that the price of Bitcoin would get annihilated because traders had the opportunity to short Bitcoin for the first time. However, Interactive Brokers would not even let their customers short initially lest they get killed by taking the advice of Cramer and the likes of him. Many people believe that Bitcoin is in a bubble and some thought that the bubble would finally get popped by the futures market, but Bitcoin is not in a bubble.
Jim Cramer is an investor, not a trader as he has proclaimed numerous times. His investment strategy is to look at the fundamentals of whatever he’s investing in usually a company and deciding if it has value. So then his reaction to Bitcoin is that it has no value because to him it is just a digital hologram or "Monopoly money".
There are several things that Cramer and others failed to take into account.
- Bitcoin has become a revolutionary vehicle for trading. Various crypto exchanges offer worldwide Bitcoin trading 24 hours a day 7 days a week. This is very unique in the trading world. Other world markets have regular daytime trading hours and the rest of the time they have very little activity and volatility. One exception, the Forex market does run continuously five days a week but the activity is a bit strange sometimes and it often doesn’t work well for traders. But with Bitcoin you can trade whenever it is convenient for you whether it is Saturday night where you are or the middle of the night on a weekday and it seems like there is almost always plenty of movement and activity.
- Bitcoin does have value as a traded product despite being just a hologram and is actually quite unique when compared to other commodities. There are a fixed number of Bitcoins that can ever exist, 21 million to be exact, unlike other commodities where if the price goes up or down more or less of the product can be produced to keep up with supply and demand. For example, if the price of oil is low, less rigs are up and running and workers get laid off and if the price of oil is high more rigs are operational and more workers are hired to produce more oil.
- Bitcoin is now increasingly viewed as an investment rather than a currency. Instead of spending their Bitcoin, more people are simply holding onto them viewing Bitcoin as a store of value or “digital gold”.
Feel free to share your opinion or let me know if you see any information here that is inaccurate.
Happy Steeming!