Howe on Cryptocurrencies: 'You Gotta Be Crazy to Be Long This Stuff'

07/16/18 11:57AM EDT

Editor's Note: Bitcoin is down -60% since Demography analyst Neil Howe laid out his short thesis on the cryptocurrency. Below is interesting cryptocurrency analysis from one of Howe's recent institutional research note. To read our Demography team's entire cryptocurrency research email sales@hedgeye.com.

Howe on Cryptocurrencies: 'You Gotta Be Crazy to Be Long This Stuff' - 12.05.2017 bitcoin cartoon

Researchers suggest that as much as half of Bitcoin’s rise last year could have been the result of market manipulation. The fact that Bitcoin is not backed by any real asset makes its price movements utterly unpredictable and difficult to interpret. (University of Texas at Austin)

Neil Howe: Historically, few asset bubbles have been the result of sheer retail investor exuberance gone wild. Almost always, there are actors behind the scenes who manipulate the market and carefully "pump" retailer optimism at critical moments--sometimes incurring defaultable liabilities along the way. This is what happened with Bitcoin, according to the authors. Bitfinex (the main cryptocurrency exchange since the demise of Mt. Gox) seems to have been pushing Tether (a cryptocurrency that "pegs" Bitcoin to the U.S. dollar and is widely used by retail Bitcoin traders) into the market whenever Bitcoin's price is falling. Tether is supposedly "100% backed by fiat currency assets in our reserve account." But the authors point out that Tether does not guarantee convertibility--and could always escape accumulated liabilities by arranging for another "inside hack job." I reiterate: You gotta be crazy to be long this stuff.

Before You Go...

Below is a brief video posted on December 13, 2017, released shortly after Howe's institutional call laying out his short thesis. In the video below, Howe offers three reasons to be skeptical about what he then called the "cryptocurrency’s parabolic ascent." Bitcoin is down -60% since this video was released.

You're going to want to watch this...

https://youtu.be/jVDzzp85D1M

Howe on Cryptocurrencies: 'You Gotta Be Crazy to Be Long This Stuff' - market brief

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