Cryptocurrencies: Next Big Thing, or Bubble Set to Burst?

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The total value of all publicly traded cryptocurrencies set a record high recently as data from CoinMarketCap indicates the crypto asset class is now worth just over $116.9 billion. That’s a 30% rise from just under $90 billion on July 31.

As CoinDesk notes, “The price increases come at a time when optimism is beginning to return to markets following a bitcoin hard fork in which a new cryptocurrency was created without disrupting the larger bitcoin network.”

“Over this time, bitcoin has enjoyed broad media coverage, though it remains difficult to determine if new buyers are being attracted to the space.”

Fidelity is trialing a new service for cryptocurrency, partnering its Fidelity Labs with Coinbase, the cryptocurrency exchange that serves nearly 9 million customers.

The $2.3 trillion investment giant’s deal enables Coinbase users to view their bitcoin, Ethereum and litecoin holdings along with other accounts in their Fidelity Portfolio.

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“We are trying to create the best customer experience,” said Hadley Stern, managing director at Fidelity Labs.

“When we allowed customers to donate bitcoin to our charitable fund we were unsure about how many people would do it, but it played out well.”

Those donations grew the $16 billion donor-advised philanthropic fund to nearly $9 million in the first half of 2017.

Skeptics like Oaktree’s Howard Marks warned last week that cryptocurrencies like bitcoin and Ethereum are “not real…nothing but an unfounded fad (or perhaps even a pyramid scheme).”

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Marks thinks cryptocurrencies may be part of the biggest valuation bubble since the dot-com era. Former PayPal COO David Sacks, an early investor in Airbnb, Facebook, Palantir, SpaceX and Uber, disagrees, and tweeted last week that cryptos are the best candidate we’ve had for the next big thing in Silicon Valley (Web 3.0).

CNBC said, “If cryptocurrencies are a bubble, we’re still in the early innings. But there are signs of frothiness: Initial coin offerings this year have raised $1.27 billion. ICO podcasts are abundant with new episodes weekly with guests claiming their new coin is going to revolutionize some new niche area. And now you have respected investor Marks saying: ‘But they’re not real!!!!!’ Bitcoin in 2017 is as real as Amazon or Priceline was in 1999.”

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The cryptocurrency growth is a boon to graphics-card makers like Nvidia Corp.

According to MarketWatch, “When Nvidia reports earnings for the second quarter of its 2018 fiscal year Thursday, the demand for its graphics cards from cryptocurrency “miners” is expected to be an important topic after reports suggested that there was a run on graphics cards, especially in Eastern Europe and Asia, for use in producing newer forms of the digital currency, notably on the Ethereum blockchain.”

In the real world, bitcoin has already proven its worth for under-empowered women. The World Bank’s Global Findex database reports that women in developing economies are 20 percent less likely to have an account at a financial institution, and even if they do, it may be controlled by male relatives.

Roya Mahboob, one of Afghanistan’s leading tech entrepreneurs, addressed this situation by paying female employees in bitcoin.

Mahboob’s Kabul-based nonprofit Digital Citizen Fund has enrolled 9,000 women and girls in educational programs teaching the basics of blockchain technology, bitcoin and Ethereum.

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“We helped 100 women start their own businesses,” Mahboob said. “The next step is we are going to have a bitcoin conference in Afghanistan so we can showcase their projects.”

Inherent benefits of Blockchain technologies include safeguarding of physical records vulnerable to political turmoil and provide smart contracts, an immutable record against corruption. “No one can destroy the record and say we don’t have a contract,” Mahboob said. “That is all important for empowering women with financial independence in developing countries.”

Across the oceans, Fidelity’s CEO Abigail Johnson, a bitcoin enthusiast, addressed a conference hosted by CoinDesk and said, “Some of you might be wondering: Why am I here today? I’m here because I love this stuff… all that the future might hold.”

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