Bitcoin Blows Past the US$14,000-Mark And is Now Larger Than the Combined Size of Singapore’s Banks
It seems like nothing can stop the meteoric rise in the price of Bitcoin.
The cryptocurrency started 2017 at below US$1,000, but it has shot through the roof in recent months, surpassing the US$5,000-mark in October and going above US$11,000 for the first time less than two months later. It did not stop there.
Bitcoin zoomed past US$14,000 today, less than 24 hours after crossing US$12,000. It is now worth US$14,038.97, up more than 1,300% year-to-date.
With that, the digital currency’s market capitalisation stands at around US$235 billion now, trouncing some of the combined market capitalisations of the Straits Times Index‘s (SGX: ^STI) components.
For one, the Singapore banks – DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11) – have a total market capitalisation of around US$116 billion.
The five largest components of the Straits Times Index, namely, DBS, Singapore Telecommunications Limited (SGX: Z74), OCBC, Jardine Matheson Holdings Limited (SGX: J36), and Jardine Strategic Holdings Limited (SGX: J37), have a combined market capitalisation of close to US$221 billion, which is still some distance away from the market size of Bitcoin.
With all the Bitcoins in the world, one can buy up every Singapore-listed real estate investment trust and property trust, which have a combined market capitalisation of some US$65 billion. Add real estate companies to the fray (total market capitalisation of US$152 billion), and you still have some spare Bitcoins left to buy a few more Straits Times Index components.
However, this does not mean that we should clamour for the cryptocurrency and get a piece of the Bitcoin-action.
Unlike stocks, cryptocurrencies are next to impossible to value. The monetary value assigned to a cryptocurrency depends entirely on its ability to to be sold to another person at a higher price in the future. This is speculative in nature and unlike businesses, cryptocurrencies do not produce cash flow.
Warren Buffett, who made his multi-billion-dollar wealth by investing in businesses with strong competitive advantages, had warned during an interview with CNBC in 2014 that people should “[s]tay away from it [Bitcoin]” as it is a “mirage”.