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Bitcoin or CRISPR: Which is the Bigger Disruptor?

Kevin Cook
Shares of Tesla (TSLA) had sunk roughly 2.7% through late afternoon trading on Friday one day after Goldman Sachs (GS) analysts said the company will likely have to raise billions of dollars over the next couple of years to continue funding the electric car giant's operations. On top of that, investors have seemingly become more and more frustrated with CEO Elon Musk and all of his side projects.
  • (0:25) - Nothing Changes Economics and Behavior Like New Technology
  • (4:00) - The "Fear Of Missing Out" On Bitcoin Pushes it Over $10,000
  • (11:10) - 4 Thinkers Who Influence Bitcoin Mania
  • (18:30) - Genetic Disruption: CRISPR-Cas9
  • (23:00) - CRISPR Creator Becomes Its Cassandra
  • (28:30) - The Brave New World of Gene Editing
  • (32:40) - Episode Roundup: Podcast@Zacks.com

Welcome back to Mind Over Money. I'm Kevin Cook, your field guide and story teller for the fascinating arena of behavioral economics.

Last week we explored the hyper speed of change coming from exponential technologies (ET). Even though I've been talking and writing about these ET for a year now since we started the podcast last November, I feel in many ways that we've barely scratched the surface.

If you had asked me a year ago what the biggest disruptor was going to be, I would have said artificial intelligence (AI).

But I've spent the last 2 months learning as much as I can about two other fields that weren't even on my radar 2 years ago: bitcoin and gene editing.

Now before you think I've turned a podcast about behavioral economics into the exponential technologies podcast, let me assure you we are still talking about both economics and behavior.

Because nothing changes both of those like disruptive technology.

So my theme today is to take these two disruptive fields and explore just what they could change in the next 5 to 10 years that will make the world almost unrecognizable to your grandparents', or even your parents' generation.

We'll start with bitcoin and blockchain, as the price of the so-called "digital gold" surged above $10,000 last night.

 

The Edge of Tomorrow

But first, a hot-off-the-press AI resource for you. I've spoken much about the historical insight and prophetic warnings of Yuval Noah Harari via his book Homo Deus.

Today, Dr. Harari posted a new documentary on his website titled Talking About a Revolution: Life in the Age of Artificial Intelligence. Here's how it's described...

What impact will the artificial intelligence revolution have on our society, culture and economy? In this video, produced for the JD Discovery conference, Prof. Yuval Noah Harari considers one of the greatest shifts since life began on Earth: natural selection being replaced by intelligent design as the principle force of evolution.

I posted the link on Twitter this morning @KevinBCook and I'm thrilled that I can share it again with you here in the midst of our timely discussions of world-changing technologies.

 

Bitcoin and the Madness of Crowds

Now, let's talk about this crazy mania going on in bitcoin. Why is it surging above $10,000, more than doubling in a few weeks?

Hedge fund manager Mike Novogratz would sum it up in just four words: the herd is coming.

He's been saying that for at least a few months and what he means is that people, and bankers, are starting to catch on that there is something real and significant about these technologies.

We've covered bitcoin and blockchain twice here this month and I speculated it could go to $20,000 next year as more financial institutions adopt different aspects of this new asset class.

Headlines about JPMorgan JPM creating a blockchain platform around the ethereum protocol, CME Group CMEplanning to launch a futures contract on bitcoin, and Amazon AMZN buying three domain names for cryptocurrency-related businesses certainly have thrown some gasoline on the crypto bonfire.

But I didn't understand blockchain and bitcoin well enough to invest in it even a month ago. Then I did some more homework and began to dabble. And whenever I do that, my learning curve really ramps up.

As I prepared my notes for this podcast, I had in mind a goal to warn anyone considering a bitcoin or other cryptocurrency investment to pay attention to the volatility. This new asset class is inviting all kinds of wild speculation, both in terms of what is theoretically possible and in terms of what price the other guy will pay for it.

In the hour before I just walked into to record this on Wednesday November 29, the price of bitcoin plunged from $10,400 to $8,600 between 2pm and 3pm ET. As I type at 5pm, the majordomo crypto is trying to get a solid foothold back above $10K.

 

What’s FOMO Got to Do With It?

That's what can happen when lots of new money rushes in and old holders take their profits. You can imagine the newly-minted and overly-exuberant crypto investors who scrambled to buy on the move above $10K, believing that it could only go higher, only to sell in a panic below $9K.

This is the euphoric crowd behavior that goes beyond greed to feeling as if you are part of a revolution.

In the stock market we call that FOMO, for the "fear of missing out."

Recall in last week's podcast Don't Fight the Gravity of Exponential Change I joked about bitcoin being the number one conversation topic at Thanksgiving family get-togethers.

Well, as a matter of fact, lots of new crypto-currency accounts were opened this week at "exchanges" like the San Francisco venture capital-backed Coinbase.

But where is this wild speculation coming from? What is it that people think is possible and probable with bitcoin that would make them invest thousands of dollars without any fundamental analysis or due diligence?

Hey, that sounds a lot like what investors do in the stock market every week!

 

Crypto Mania and the Death of Banking... and Taxes

In just the past few months, a lot of legitimacy has been granted to blockchain distributed ledger technology (DLT) through ventures like JPMorgan's Quorum platform which will utilize the ethereum protocol (i.e., a programming language) to create smart contracts for their clients and partners.

But there is a sense of bigger revolution among the bitcoin intelligentsia and many of them want nothing less than the destruction of the commercial and federal fiat-money banking systems.

These global libertarians value privacy, freedom, security and transparency more than loyalty to any state.

I highlight three of those radical rogues in the podcast, including that rascal genius of cyber-security, John Mcafee. And I also share the fundamental views of Tom Lee of Fundstrat who has helped fuel this week's price action in bitcoin with his upped price target of $11,500 a couple of weeks ago.

Incidentally, in the thick of this "gold rush" for bitcoin, Mcafee runs a public company called MGT Capital Investments MGTI which does the "mining" of cryptocurrency using high-powered computers with NVIDIA NVDA GPU semiconductors.

I checked their website and found a stunning comment by CEO Robert Ladd: "While power availability (in large part caused by unprecedented demand from the emergent Ethereum market) has delayed our deployment, we have sourced sufficient power to accommodate the 170 rigs not yet deployed, as well as the 3,650 rigs to be delivered over the next several weeks."

Bitcoin miners like MGT apply the term "rig" to describe the specialized computer configurations used to crunch cryptographic codes and "mine" for bitcoins. MGT already had nearly 900 rigs running and from the above it sounds like they expect to have over 4,700 rigs in operation in the first half of 2018 -- a 5-fold increase in their current deployment of digital artillery!

One element I forgot to share in the podcast was the logic of cryptos also disrupting taxes. If more money and digital stores of value can be transacted through semi-private peer-to-peer networks, governments will soon find themselves in a very difficult position to track and collect the taxes they are accustomed to.

 

CRISPR Creator Becomes Its Cassandra

In the second half of the podcast, I review some of the patent disputes over CRISPR gene editing technology between research institutions and companies like Editas Medicine EDIT and CRISPR Therapeutics CRSP.

But I also try to better explain the position of Dr. Jennifer Doudna, the co-discoverer of CRISPR-Cas9 who has been vocal in the past 2 years about its risks and dangers.

Doudna had just published a book in June chronicling her journey of discovery and decision titled A Crack in Creation: Gene Editing and the Unthinkable Power to Control Evolution.

There's a lot to learn here and whether or not you are inspired to read her book, you may be interested to see her speak in several presentations that are on YouTube. Here are three that highlight her "evolution" of thought from passionate discoverer to more somber Cassandra...

Genome Engineering with CRISPR-Cas9

How CRISPR Let's Us Edit Our DNA

A Crack In Creation: Interview at the Aspen Institute

It must be at once amazing and daunting to be Jennifer Doudna. At 12 you read James Watson's The Double Helix about the discovery of DNA that inspires your career in biological research. And then you go on to discover an application of that science so powerful that you sometimes wonder if you should have.

I can't wait to get my hands on that book.

And while it is definitely Dr. Doudna's right and responsibility to warn us of the dangers of gene editing, especially if misused, we must take a different approach to all the tidal waves of technology innovation which we cannot stop nor control, and which are only accelerating change.

We must embrace learning about them, or we will be none the wiser when companies, politicians, or criminals try to use our ignorance against us.

Disclosure: I own shares of NVDA for the Zacks TAZR Trader portfolio and shares of EDIT in Zacks Healthcare Innovators.

Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader and Healthcare Innovators services.


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