Cryptos Are Nothing But Candy Crush Tokens - Wall Street Analyst
(Kitco News) - If you ever played Candy Crush on your phone, then one Wall Street analyst’s analogy might ring very true, which compares cryptocurrencies to tokens in the popular online game.
“As any player of online games can attest, the goal of most games is to win coins, tokens, jewels, or the like that are helpful in reaching new levels in the game,” Richard Bernstein, chief executive at Richard Bernstein Advisors, said in a note on Wednesday note. “Winning game coins or tokens is remarkably similar to ‘mining’ of cryptocurrency coins.”
The one significant difference between the game’s tokens and cryptocurrencies is that the latter can be traded.
“If only the founders of Candy Crush had realized that selling the coin could be more profitable than selling the entertainment,” said Bernstein. “Change the words ‘playing Candy Crush’ to ‘solving a sophisticated mathematical formula,’ and suddenly global currencies have been revolutionized,” he said.
Making things worse for digital currencies is that this tradability factor is actually what is driving the classic asset bubble that has formed over the past year, according to the note.
Bernstein added that cryptos’ price action matches the five signs of a bubble, which were outlined by financial historian and author Edward Chancellor: increased liquidity and turnover, democratization of the market, growing leverage, and rising new issues.
But, Bernstein also pointed out that the presence of a bubble does not mean that cryptos are no longer viable. Instead, it simply “suggests that the return-on-investment could be considerably lower than investors currently expect,” he said.
Where does @maxkeiser think #bitcoin will go? Watch the full interview to find out: https://t.co/BUlULE7XEX@DanielaCambone pic.twitter.com/9C5Gi0DFw4
— Kitco NEWS (@KitcoNewsNOW) December 8, 2017To improve investors’ odds, traders should insist on regulation and oversight of the cryptocurrency market, which would limit fraud. “There are now over 1,300 cryptocurrencies and it seems reasonable to assume all 1,300 are not of equal quality,” Bernstein wrote.
The most popular digital currency, bitcoin, has been trading around $8,000 this week, after managing to fall from an all-time high of around $20,000 just within the past four months. Bitcoin was last seen at $8,230.00, up 0.72% on the day, according to Kitco’s aggregated charts.
By Anna GolubovaFor Kitco News
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agolubova@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.