Bitcoin captured the attention of investors on its way to a 1400% gain for the year. Debates raged over whether it qualified as one of the greatest bubbles of all time or if 2017’s gains were just a stepping stone to future values.
What does bitcoin do for an encore? We’re comfortable calling it a (crypto)coin flip. It’s clear that the speculative animal spirits of this market rally seemed to concentrate themselves in the digital currency’s astronomical rise. While this type of euphoria is often a hallmark of a peaking market, this euphoria doesn’t appear to be marketwide, instead being concentrated in the cryptocurrency craze. Bitcoin, in our view, is not a systemic asset that poses a threat to the broader economy or investment landscape, meaning a repeat performance in 2018 or a collapse in bitcoin value shouldn’t be a primary driver in broader stock or bond prices.