Guess what asset has increased over 50% in the last month?

The teaser image may have given it away, but if you guessed Bitcoin, you are correct.

According to www.coindesk.com Bitcoin was trading at $454.82 on May 13th, closed at $675.35 on June 12th and has moved between $663 and $719 as of midday trading on June 13th.

 

What should we make of this?

Well, first, we must understand that Bitcoin regulation is still very nascent and emerging, second, that Bitcoin is used predominantly by those engaged in nefarious activities and third, that it has a history of extreme risk and volatility. So, generally Bitcoin is not suitable for investment purposes, but it’s still worthy of some attention and analysis.

Can we explain through economic analysis why such an increase is justified? The short answer is not really.

According to a recent press release covered by www.coindesk.comThe US Department of Homeland Security (DHS) has awarded as much as $600,000 in grants to six companies working on blockchain applications for the government” and there have been other recent stories and press releases related to increased interest in the underlying blockchain technology. So the increase certainly may be partially driven by media interest and more companies looking for innovative ways to use and leverage distributed database technology. Another factor may be the increased difficulty in mining bitcoins, thus increasing their scarcity. And technical factors such as volatility and sentiment that we typically use to measure other more traditional currencies also help explain the run-up.

But over 50% in one month? It may make sense to those who track and follow the hyper volatile bitcoin market and virtual currencies, but many of the rest of us still have trouble connecting the dots of increased prices in the currency to the economic rationale. That’s not to say good reasons don’t exist and aren’t justified, they are simply not as obvious and accepted as say the price increase of a stock based on their intention to merge with another company.

Making sense of this new currency and technology can be confusing, so if you would like to learn more about the basics of Bitcoin and Blockchain, please like our Facebook page and plan to attend our free virtual webinar on Facebook Live Streaming, tomorrow, Tuesday June 14th at 12:00 Eastern.

https://www.facebook.com/jbradfordinvestments/

 

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Advisor and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.