It's probably fair to say that the big rise in Bitcoin this year has caught many by surprise.
Today, the value of one Bitcoin hit $100. In early March, they were trading below $35. In January, they were trading below $15.
We've noticed a lot of interest from readers and investors in recent weeks as the virtual currency has gone parabolic.
However, as of yet, we only know of one Wall Street analyst who has taken up writing about Bitcoin: ConvergEx Group Chief Market Strategist Nick Colas.
Naturally, we were curious what Colas was hearing from his clients, who we figured must be asking some questions as well.
Here is what Colas told us (emphasis added):
The reaction from clients has been pretty uniform: it must be a bubble. Too far, too fast, too new … you get the idea. Moreover, it’s very hard to short Bitcoins, so there’s no real way to express that pessimistic point of view, which is saving a lot of people some real money, since Bitcoin has some solid momentum just now.
Where is all of the momentum behind the Bitcoin trade coming from?
Colas bullets a few points:
- An increasingly tech-savvy base of savers all around the world don’t think it is any stranger to trust an open-source piece of software than it is to put your money in a commercial bank
- Lots of people around the world are uncomfortable with central bank policies, which seem to give money away to a global banking system which remains fundamentally broken
- Worries over heavy deposit taxes in various European countries (Spain, Greece, and even Italy), courtesy of the resolution to the Cypriot banking crisis
- Some clarification of U.S. regulations, bringing Bitcoin long-needed legitimacy
- A naturally constrained and predictable supply through the issuance process
The term "perfect storm" fits here, even if it is a bit of a cliche at this point, says Colas.
Where it goes next is anyone's guess, but Colas thinks the next big thing to watch out for will be whether mainstream businesses start accepting Bitcoin as payment in a more widespread fashion.
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