This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Scrutinizing The Real Threat Of Virtual Money

CHRIS LAU, KAPITALL: After peaking at around $240, Bitcoin last traded at around $120.50. Investors may view the Bitcoin as a case study for being in a bubble, but there is real need for the currency in some circumstances. Bitcoin does not have a store of value like gold, but it may be used to exchange for goods, real currency, and is in limited supply. Conversely, some world currencies are becoming endlessly available, hurting their worth. For example, Japan announced a quantitative easing program that aims to depreciate its currency. [More from Chris Lau:  4 Semiconductors to Watch Ahead of Earnings Report]


Chart Source: Mtgox

The possibility that Bitcoin is a threat to the credit card was asked by Discover Financial Services (DFS). Wall Street Journal reported the CEO said:

“I guess I would be a little surprised if Bitcoins actually had an effect…on us over time.”

Discover is partnering with EBay’s (EBAY) PayPal, which will allow PayPal users to use their phone number to make payments to stores that accept Discover cards.

For now, Bitcoin is in the early phase of attracting online merchants. Its competitive edge over traditional financial houses is that it helps users avoid transaction fees charged by credit card companies.

Business Section: Investing Ideas

MasterCard (MA), Visa (V), and American Express (AXP) would be hurt if Bitcoin were to gain traction. The card companies would need to lower transaction fees or provide additional incentive as a response. Traction would only rise if demand and supply dynamics were to favor the use of Bitcoins. More merchants would need to embrace Bitcoins, while more consumers would need to accept the risks of using the “currency” in favor of avoiding fees.

In the chart below, the card companies are valued with a price of profit (or “POP”) of between 14 and 21. Investors do not expect Bitcoin to be much of a threat:

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.99 0.31%
FB $102.01 0.10%
GOOG $682.32 -0.12%
TSLA $151.04 0.38%
YHOO $27.04 1.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs