2017: A Banner Year for Cryptocurrencies

Bitcoin and other cryptocurrencies have risen tremendously in 2017. Here's what you need to know about bitcoin, especially if you're thinking about buying some now.

A full transcript follows the video.

This video was recorded on Dec. 18, 2017.

Michael Douglass: Story No. 3: Cryptocurrencies. Now, you might question putting this in financials, but frankly, most of the companies that are really involved, and I'm talking about the Cboe [Futures Exchange] and options and futures and such, those are usually considered financials companies. Plus, we're the Financials show -- I think that means anything financial could be considered Financials. So I'm just going to lead off with this one stat, which is just crazy to me. Bitcoin started the year at just under $1,000 for its price. It's now over $19,000 as of our taping here on December 18th. That's just enormous growth.

Matt Frankel: Yeah. And it's actually worth pointing out that this has been bitcoin's third best year. This isn't even the highest performance percentage-wise. I could tell you from personal experience, I wish I had back the 20 bitcoins I owned in 2015 when they were worth $200.

Douglass: Yeah, oof. [laughs]

Frankel: Wouldn't we all? I also wish I would have played the winning lottery numbers last night. But that brings me to the point I wanted to make for investors. This is very much a speculative investment at this point. Bitcoin and any other cryptocurrency for that matter, or any company that's involved in cryptocurrencies, any financial firm that's placing big bets on cryptocurrencies in their technology, these are all very speculative things at this point. Don't confuse a long-term investment with gambling.

Douglass: And I think this is an important point. It's been very interesting, particularly in the last month, watching so many people who have never thought much about investing suddenly get really excited about bitcoin and talk about trading bitcoin and making money in bitcoin. It brings back to me that timeless bit of wisdom from Warren Buffett, "be fearful when others are greedy and greedy when others are fearful." I'm seeing a lot of greed, and I'm seeing a lot of people really really excited about this, and I think excited beyond what is reasonable, and that as an investor makes me afraid. So that's why I'm very firmly outside of the cryptocurrency space and likely to remain so.

Frankel: If you think back to the dot-com boom, the point when you really needed to start worrying was when people who, like you said, never were interested in investing before were suddenly buying mom and pop's dot-com. And just like any other boom, like the tech boom, a lot of money will be made here, a lot of money will be lost here. They just recently started trading bitcoin futures on two major futures exchanges. This should help bring a little stability, theoretically, to the price of bitcoin, but it also adds an interesting dynamic in that it allows institutions to short bitcoin, which has never been an option before. So this could be kind of a stabilizing mechanism, as well as downward pressure at the same time. It'll be interesting to watch how the bitcoin futures introduction plays out. That might be one of our big stories of 2018.

Douglass: I suspect so. I've received a few emails from folks who are interested in having us do a couple of deep dives on cryptocurrencies. I want you all to know that I have a book, and I'm planning to read it and do some more research, and definitely very much on our list for 2018. Matt is actually one of our big cryptocurrency writers, so we'll have a lot to talk about. But I want to make sure that we have the time to really put together some really great episodes before we hop into that. So, just to let you all know, it's coming. It'll come sometime in 2018, probably in the first quarter.