Although bitcoin (BTC)came to the surface nearly a decade ago, the digital currency really burst into the mainstream in late 2017. The fresh surge in demand was evident when bitcoin futures began trading on Cboe Global Markets (CBOE) and CME Group (CME) exchanges, the former of which experienced website outages amid crazy volume. Below we will take a deeper look into the volatile cryptocurrency world, as well as some stocks that have moved on blockchain ties.
Bitcoin is a type of cryptocurrency that is based on a digital peer-to-peer system. The currency is not tangible in the way a dollar or euro is, and is also unregulated, which means it does not run through a third party or financial institution.
Bitcoin was first brought to the table in 2009 by Satoshi Nakamoto, an anonymous person who published a paper in 2008 and released a software client a year later. Since the currency does not use a third party source such as a bank, it is traded through a system called "blockchain," which we will explore further below.
In plain words, blockchain is ledger technology that is used as a means to record and safely transfer assets and data (e.g., cryptocurrency transactions) online. Blockchain technology grows "like ever-expanding archives of their own history while also providing a real-time portrait," per Coindesk.
Many stocks have capitalized on the bitcoin and blockchain hype in recent weeks. Overstock.com (OSTK) was ahead of the curve, announcing in August that it would begin accepting all major cryptocurrencies. Several other companies tossed their hats into the blockchain ring, including Wall Street rookie Longfin (LFIN), Net Element (NETE), and even Long Island Iced Tea -- now known as Long Blockchain.
Riot Blockchain (RIOT), Marathon Patent Group (MARA), and Ameri Holdings Inc (AMRH) have also moved on cryptocurrency news lately. Meanwhile, Eastman Kodak (KODK) just developed a new cryptocurrency for photographers, called KODAKCoin.
As bitcoin has taken off over the past few months, many high-profile skeptics are beginning to voice their concerns about a bubble. One of the most notable skeptics is billionaire Warren Buffett, who opined that he "can say almost with certainty" that cryptocurrencies will "come to a bad ending." Charlie Munger, Buffett's right-hand-man, agrees, stating, "Bitcoin and the other cryptocurrencies are also bubbles."
New York Fed President William Dudley called bitcoin "not a stable source of value," and JPMorgan Chase (JPM) CEO Jamie Dimon has been one of the most vocal critics of bitcoin, though he recently walked back his comments about it being "a fraud." Billionaire Ken Griffin, head of Citadel hedge fund, said he worries "about how this bubble might end," but expressed optimism about the potential of blockchain.
Meanwhile, regulators in South Korea are proposing an outright ban on trading cryptocurrencies. The website of the presidential Blue House temporarily crashed earlier today, in fact, due to a flood of online signatures opposing the legislation.
Those who want to trade bitcoin directly can do so independently, via sites like Coinbase, a popular service for bitcoin "wallets." As alluded to earlier, traders can indirectly speculate on the digital currency with newly launched bitcoin futures, and there's been buzz about potential bitcoin ETFs on the horizon. However, if speculating on bitcoin seems too big of a risk, or if you still have a soft spot for trusty old fiat currencies, consider these six bitcoin alternatives.