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GIS SR 2017 09 15 (1).pdf


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GLOBAL INVESTMENT STRATEGY - SPECIAL REPORT SEPTEMBER 15, 2017

BCA RESEARCH INC.

Is the
explosion
in virtual
currencies
relevant for
the broader
investment
community,
including
those investors who
would never
consider
buying
bitcoin?

This raises the question of whether the explosion in virtual currencies is relevant for the
broader investment community, including
those investors who would never consider
buying bitcoin. We would answer yes, albeit
in a limited form thus far.
The market capitalization of all virtual currencies currently stands at $120 billion
(Chart 4). Globally, there is about $6 trillion
in currency outstanding, so the value of virtual currencies is now 2% that of traditional
cash and currency. That’s not huge, but it’s
no longer trivial either.

CHART 3

Bitcoin Bubble?
BTC
USD

BTC
USD
USD* PER BITCOIN
MANIA INDEX**

4000

4000

3000

3000

2000

2000

1000

1000

The importance of virtual currencies increases if we look at rates of change. The global
stock of currency in circulation has risen by
5.5% over the past 12 months. However, if
we add virtual currencies to the mix, the rate
of growth jumps to 7%.

0

0
© BCA Research 2017

12

14

16

18

20

* SOURCE: THOMSON REUTERS.
** THE MANIA INDEX DEPICTS HOW THE PRICE OF BITCOIN WOULD BEHAVE
IF IT PEAKED IN AUGUST 2017 AND IF IT FOLLOWED THE PREVIOUS
BUBBLE-BUST PATTERNS. IT IS BASED ON A REGRESSION WHERE THE
DEPENDENT VARIABLE IS THE PRICE OF BITCOIN, AND THE EXPLANATORY
VARIABLES ARE PREVIOUS BUBBLES IN THE FOLLOWING ASSETS: THE JAPANESE
NIKKEI 225, THE NASDAQ, SILVER PRICES, THE S&P 400, THE U.S. DOLLAR,
TAIWANESE EQUITIES, NICKEL PRICES, AND COCOA PRICES. IN REALITY, THE
EXTENT OF THE PRICE APPRECIATION IN BITCOIN OVER THE PAST FEW YEARS
IS MUCH GREATER THAN THAT OBSERVED IN PREVIOUS MANIA EPISODES.

CHART 4

Virtual Currencies: Market Cap Is Now Non-Trivial
180
Bn
US$

CRYPTOCURRENCY MARKET
CAPITALIZATION:

160

BITCOIN
140

ETHEREUM
BITCOIN CASH
RIPPLE

120

LITECOIN
OTHERS

100
80
60
40
20
0
MAR-16

© BCA Research 2017

JUN-16

SEP-16

DEC-16

MAR-17

JUN-17

SEP-17

NOTE: DATA AS OF SEPTEMBER 13, 2017; SHOWN AS A 14-DAY MOVING AVERAGE.
SOURCE: COIN MARKET CAP, COIN DANCE.

editor@bcaresearch.com • TEL 514.499.9550 •

www.bcaresearch.com Copyright © 2017 BCA Research Inc. All Rights Reserved. Refer to last page.

Daniel Cappuccitti FOSTER & ASSOCS FINANCIAL SVRS

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