Blockchain and cryptocurrency-related stocks soared Tuesday as bitcoin hit a record high of $48,000 early Tuesday before recently settling around $46,000.
The biggest blockchain exchange-traded fund, Amplify Transformational Data Sharing ETF (BLOK) - Get Report, recently traded at $50.20, up 2.70%. It has doubled over the past six months amid market mania for crypto investments.
Among individual stocks, Marathon Patent (MARA) - Get Report, which mines cryptocurrencies, was up 12%; Riot Blockchain (RIOT) - Get Report, which builds blockchain technology, was up 9%; Bit Digital BTBT, which engages in bitcoin mining, was up 4%; and Ebang International EBON, which makes bitcoin mining equipment, was up more than 1%.
So how high can bitcoin fly? Nobody knows. There’s no fundamental way to value bitcoin like there is for stocks and bonds. Bitcoin is called a digital currency, but so far, it’s barely used in legitimate commerce.
What bitcoin has turned into is a store of value. It has value because people think it has value. Some bitcoin advocates say it’s a hedge against inflation and against falling financial assets, such as stocks, bonds and the dollar. As long as people believe that and act on that belief, it becomes true.
But if confidence ever falters in bitcoin, it can crater in a hurry, as has occurred several times in its 12-year existence.
There’s certainly a chance that bitcoin will become the new gold -- an investment people turn to in times of trouble. But it also may end up like Myspace, the largest social networking site from 2005-08, before Facebook (FB) - Get Report blew it away.