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There seems to be nothing that can convince Dennis Gartman to turn bullish on bitcoin.
Despite tanking this month, bitcoin has still soared over 1,400 percent this year. But Thursday on CNBC's "Futures Now," The Gartman Letter editor and publisher reiterated his skepticism on bitcoin's meteoric rise, a view he has held for the past few months.
"I'm very bearish on bitcoin, I think it's one of the silliest ideas I've heard in a long time," he said. "To be separated from the brilliance of the block chain, [makes even] tulips in [17th] century Holland look almost like a quiet, well-demeanored market," Gartman said, using a frequently invoked analogy of the boom in tulip prices that sent the Dutch into a frenzy nearly 400 years ago.
After reaching spectacular heights, tulip prices eventually tumbled sharply. The phenomenon has since become synonymous with bubble markets like 90s dotcom stocks, and housing prices prior to the 2008 financial crisis.
Gartman told CNBC that bitcoin will not only burn all those involved with it, but once it does there will be a rush into gold.
"When bitcoin falls, and it shall, it'll trade under $5,000," he said. "Whether it does it next week, next year, six months from now, it'll happen. And then I think we'll find at the margin money that had moved into bitcoin and away from gold will move away from bitcoin and into gold."
Bitcoin has tumbled 6 percent this week, the latest plunge due to South Korea's possible actions to crack down on the cryptocurrency.
There are dangers lurking in the cryptocurrency market that could burn a lot of investors, according to Michael Dudas, a veteran gold analyst.
Dudas, a partner at Vertical Research, refers to the emerging asset class as a "dicey investment" — citing the amount of fast money flowing into the space and the lack of regulation.
"It's a very speculative investment right now," he said Tuesday on CNBC's "Futures Now." "Just in the last few days, the amount of volatility the market has seen has made headlines around the world."
His thoughts came as bitcoin was trying to recapture its latest losses from a wild ride that shows no indication of ending. It fell to as low as $10,400 on Friday. But by Tuesday, it was back in rally mode.
"There's still just a lot of misunderstanding or a lot of education required about the supply of these different cryptocurrencies [and] how it's going to play out over the longer term," he noted.
Yet, Dudas acknowledges that the decision by Cboe and CME to trade bitcoin futures contracts is a sign that cryptocurrencies are here to stay.
"Putting this into the marketplace certainly adds a sense of legitimacy to the bitcoin markets. But again, it's early stages, and markets do go both ways," he said. "The markets and investors might find an opportunity with these exchanges to be a little bit more negative, and be short the coins as opposed to long."
But a lot of work still needs to be done on the regulatory front, contended Dudas. He sees this as a big catalyst for sustainable downside risks.
"If there are some very big volatile issues and the public gets hurt in any sense, I think that could cause a chill to this market without question,"' Dudas said. "The regulation aspect from a government could cause the market to fracture a bit."
The Wells Fargo Investment Institute sees the tax overhaul as a game changer.
Scott Wren, the firm's senior global equity strategist, says there's a high probability the stock market could see a 10 percent gain or more next year because it's single-handedly lengthening the recovery.
"This tax package is definitely a kicker, and it's going to boost our GDP number up a little bit. It's going to boost our earnings number, our targets and it's going to push out the length of this cycle, " he said this week on CNBC's "Futures Now." "What this tax package is going to do is extend this for a couple of more years."
Wren has been one of the more cautious voices on the street. In September, he predicted a 4 to 8 percent pullback on the program. But it never happened, and the S&P 500 is on track to end the year 20 percent higher.
"We thought we'd see the high for 2017 in the middle part of the year," said Wren. "We weren't calling for an end to the cycle. ... We were not bearish. We were in the pullback camp."
Wren now predicts mostly upside ahead and has backed away from his 2019 recession risk forecast.
"Somewhere out there on the horizon is going to be a time to get defensive. But, it's not now," said Wren, who believes the economic recovery is "long in the tooth."
Wren's official forecast calls for a 2018 year-end S&P 500 target of 2,650 to 2,750. That's around where the index is currently trading. But he's tinkering with it — reiterating that the tax package was more aggressive than his initial estimates.
"There's some big leverage in earnings when, of course, the tax rate is a little lower at 21 percent. When you can expense 100 percent of your capex, that is a big number. That really pushes earnings up higher than what we expected," Wren said. "There are some adjustments to be made here on our part. We'll probably do that over the course of the next week or so."
Bitcoin plunged Friday, taking the digital currency briefly below $11,000 and down 47 percent from a record high hit at the start of the week.
Bitcoin had rallied to a record high above $19,800 on Sunday and was trading near $15,500 for much of Thursday New York time, according to Coinbase. But an afternoon selloff accelerated into the night, and bitcoin dropped 30.2 percent Friday morning to a low of $10,400 on Coinbase. It had recovered above $14,600 by Friday afternoon, off 27 percent from the all-time high.
There were no immediately apparent explanation for the selloff and extreme volatility.
"I would say the drop in bitcoin is a result of the massive new inflows of retail investors who are relatively 'weak hands' and more prone to sell at the sight of falling prices than the capital that has been in the system for a while that has a longer term outlook," Alex Sunnarborg, founding partner at cryptofund Tetras Capital, said in an email.
Adding to the confusion, trading on Coinbase was disabled for more than two hours in the middle of the day. The company had more than 13 million users at the end of November.
At its lows, bitcoin had fallen 47 percent in just five days and lost about $9,400. The digital currency erased more than $1,000 in one hour alone Friday morning.
Bitcoin performance during one hour Friday morning
Bitcoin futures also tumbled Friday. The CME bitcoin futures expiring in January, which launched Sunday, reached "limit down," falling nearly 20 percent to $12,265 in morning trading before settling 7.8 percent lower at $14,135. Markets were still open for trading.
The Cboe bitcoin futures contract, which launched Dec. 10, briefly dropped 21 percent to $12,050 after triggering a brief, built-in trading halt due to price volatility. The futures settled 8.7 percent lower at $13,960.
Trading volume in the Cboe bitcoin futures contract for January more than doubled from Thursday to a record of 12,554 contracts Friday. The equivalent trading volume in CME's bitcoin futures was near 11,800 contracts, also the highest since their launch.
The bitcoin offshoot, bitcoin cash, collapsed, temporarily falling 40 percent Friday to $1,873, after topping $4,000 two days ago, according to Coinbase. Bitcoin cash recovered to trade near $2,897 in afternoon trading.
Despite the selloff, bitcoin is still up more than 1,300 percent for the year and bitcoin cash is still up more than 380 percent since it split off from bitcoin on Aug. 1.
"Investors were sitting on such significant gains that a correction was inevitable," said Benjamin Roberts, co-founder and CEO of Citizen Hex, an ethereum-focused start-up backed by three Canadian venture funds.
"These markets are driven in the short term by word-of-mouth adoption and profit-taking, and in the long term by the increasing utility of blockchain tech," Roberts said in an email.
Blockchain eliminates the need for a third-party intermediary by creating an instant, permanent record of transactions between two parties.
Bitcoin, the first application of blockchain technology, has come a long way since its inception less than a decade ago. More than 120 "cryptofunds" have formed this year, according to financial research firm Autonomous Next, and many expect the launch of bitcoin futures will encourage more institutional investors to buy into the cryptocurrency trend.
Someone just bet that bitcoin will top $50,000 next year.
Online records from New York-based digital currency trading platform LedgerX showed 275 call options expiring Dec. 28, 2018, were bought in Wednesday's trading session at a volume-weighted average price of $3,600. At that price, roughly $1 million was spent on the bet.
The trade gives the investor or investors the option to buy bitcoin at $50,000 in the roughly next 12 months, implying expectations that the digital currency will soar beyond that price. An investor would lose the bet if bitcoin doesn't reach $50,000 in that time period, but would reap profits if it climbs well above that level.
With bitcoin trading near $16,700 Thursday, that means the call options trader or traders expect the digital currency to soar more than 200 percent in the coming 12 months. Bitcoin is up about 1,900 percent over the last 12 months, according to Coinbase.
The transaction was first reported by The Wall Street Journal.
Startup LedgerX is less than 5 years old and launched bitcoin options trading for institutional clients in October.
The stampede to record highs will continue in the new year, said one of Wall Street's biggest bulls.
Jonathan Golub, Credit Suisse's chief U.S. equity strategist, said he expects the S&P 500 to rally another 7 percent plus from current levels and that there are several key factors that will continue to drive markets next year.
In fact, the market's big run in 2017 was a "surprise rally," said the strategist, especially given economic factors that could very well have become headwinds.
"The biggest issue was a very good economic backdrop not only in the U.S. but around the world," Golub said Tuesday on CNBC's "Futures Now." "Against that, normally what happens is wages go up and it squeezes margins and it gets the Fed involved. But that didn't happen this year."
Instead, said Golub, wages actually flattened, which means company margins weren't under pressure. That, fueled by better-than-expected tech earnings, sent the tech sector soaring, which led the market to new highs. Not only does Golub see the same trends continuing in 2018, but he said the potential tax plans' effect will be another factor that kicks the market into high gear.
"I think we're going to see the economic upsides from these tax changes start to hit in late 2018," he said. "With respect to wages, they are probably going to begin to tick up, and we know the Fed's going to be taking some more action. So that may be a little bit less positive than last year, but still pretty good."
"Are we going to see a 20 percent return? Probably not. But will we see a double-digit return? I think that we probably will," he added. His current year-end price target on the S&P 500 is 2,875.
As a result, Golub said that investors should be looking to sectors that also "win" from the tax plan. While he thinks retail stocks and the utilities sector could see a bounce, Golub said, financials will be the best bet for investors going into 2018. Especially if wages do increase and the Fed raises interest rates, banks will be in the best position to rally off both a rate increase and tax reform at the same time, the strategist said.
Markets were mixed on Wednesday, though the S&P 500 was still up 20 percent year to date.
He's taken on President Donald Trump and the Federal Reserve. Now, libertarian former congressman Ron Paul is taking on bitcoin.
According to Paul, cryptocurrencies have become an asset that rivals the bubble he sees in stocks.
"I think it's going to continue to do exactly what it's doing. It's going higher and it's going lower," he said Tuesday on CNBC's "Futures Now." "We can look at what's happening now, which to me is a climactic end of QEs."
Paul, who has done commercials touting currency competition for a company that benefits from bitcoin's rise, views the crypto craze as a side effect of central banks doing several rounds of quantitative easing to cope with the last financial crisis.
"I look at the problems we face. I think they're gigantic and people are desperate and looking everywhere. Why would they buy bonds that pay negative interest rates? Why would they buy stocks, and say well this time it's different? " asked Paul. "Cryptocurrency is a reflection of the disaster of the monetary dollar system."
Paul, who's also a medical doctor and former Republican presidential candidate, argues that cryptocurrencies are in an "exponential bubble" where trying to calculate its real value is extremely difficult. Bitcoin, the largest of the cryptocurrencies, has been trading above $17,000.
He hasn't been able to pinpoint when a plunge could happen in cryptocurrencies or the stock market. But Paul says the danger is real.
"They're both big bubbles in the sense that it occurred because there was excessive credit. But if you look at the curves, I think that the cryptocurrency curve looks more threatening," Paul said.
Forget bitcoin — the biggest risk to stocks next year will actually be the bond market.
That's according to Joe Zidle, a portfolio strategist at Richard Bernstein Advisors. The Wall Street analyst believes that investors are going into 2018 assuming that rising bond yields — which move inversely of prices and affect consumer borrowing costs — will stay low.
For that reason, Zidle thinks markets are generally unprepared for a possible rally in rates that could occur, thanks to a number of fundamental factors.
"I think in 2018, the big surprise could be higher 10-year Treasury yields, and that's something that investors are not really positioned for," he said last week on CNBC's "Futures Now."
The benchmark 10-year Treasury bond yield has fallen lower, even following the Federal Reserve's decision to hike rates on Wednesday. It has been generally been moving between 2.3 percent and 2.4 percent for the past month, but has risen well above its year to date lows in early September.
According to Zidle, there are three things that could drive the 10-year yield higher, potentially pushing up borrowing costs across the economy.
"[First, we're] seeing economies all around the world accelerating," he explained. "Number two, we've got the tax package, which does bring a promise of the acceleration of growth," he said, speaking about the GOP-led tax bill that was finalized out late last week.
"And then number three, we have the potential for inflationary pressures as labor markets get tighter and tighter," he said. The rate of unemployment has dropped sharply as job growth picks up speed, meaning employers may have to pay more to hire increasingly scarce talent. At least for the moment, that hasn't happened.
"The net result of all that could be an acceleration of growth, an acceleration of inflation which pushes the ten-year treasury yield higher," he added.
The 10-year yield sat at around 2.37 percent on Friday, still sitting below the 2.44 percent at which it began the year.
Stocks hit new record highs Friday, but despite the seemingly unstoppable bull market, one strategist said there's a historical indicator that could signal a pause in the rally.
According to Sam Stovall, chief market strategist at CFRA, generally during midterm election years the S&P 500 Index has actually fallen during the second and third quarters of that year.
With midterm elections coming up in 2018, Stovall said that while the S&P can still rally to 2,800 by year end, it may face a bumpy road to his target.
"Will the Republicans lose control in one or two houses? What will that do for infrastructure spending [and other policies]?" he said on CNBC's "Futures Now" this week.
"So I think that there is a lot of uncertainty that could be building up into a crescendo as the year moves on," he added.
That aside, Stovall is also seeing some fundamental obstacles in the market, namely with earnings expectations. While earnings growth was one of the main drivers of the market this year, Stovall said there could be a slowdown going into 2018.
"What probably will end up supporting share prices is the fact that we really don't have enough details just yet to be able to push up earnings expectations," he explained. "Yes, sentiment has been elevated, prices have been increased, but the earnings themselves have not."
However, Stovall said he anticipates that investors could "probably see S&P 500 earnings estimates go from a little less than $145 per share to a shade above $155 per share," based on the details of the GOP's tax plan.
The S&P, Dow and Nasdaq hit a record high on Friday, with all three market indexes on track for their best year since 2013.
Bitcoin has made some investors quite wealthy, but one Wall Street veteran won't touch it.
The Lindsey Group's Peter Boockvar believes the bitcoin boom is a classic mania that will ultimately inflict a lot of pain. He calls it a "gigantic price chase based on nothing."
"If bitcoin went to $50,000 or $5 tomorrow, I don't think either price would surprise anybody," the firm's chief market analyst said Tuesday on CNBC's "Futures Now." "Its concept I get — an alternative currency, an alternative form of transacting for goods and services. But the price itself is nothing more than a historic bubble."
In just the past six months, bitcoin has surged 541 percent and is now bouncing above $17,100. Bitcoin futures are up 12 percent since trading made its debut at the Cboe.
The big gains extend to its smaller competitors such as litecoin. It has ripped 260 percent higher over past week, gaining 70 percent on Tuesday alone.
"The problem with cryptocurrencies generally is that there's potentially an infinite amount. I mean even bitcoin is now forking and sort of spawning brother and sister coins like bitcoin cash," said Boockvar. "What good is it if you can spawn a new one every day?"
Boockvar, a CNBC contributor, is more comfortable investing in an asset that's thousands of years old versus one that's only 10.
"If bitcoin is being perceived as this alternative currency, where gold is one as well, ... I would not be surprised when the day comes when bitcoin falls. Maybe that's when gold eventually rallies," he said. "It's much more difficult getting gold out of the ground than having a laptop and creating some new cryptocurrency."
He said a variety of factors could spark a cataclysmic cryptocrash. The currencies could flame out, lose their novelty or a vital regulatory issue could emerge, according to Boockvar.
And, there's one particular vulnerability that's partial to the cryptospace.
"It could be hacked. It could be someone who loses their coins," Boockvar said.
CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.
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