FINANCIAL MARKETS BLOG

Trump’s policies may well enrich many firms, but they will impoverish the average American. The headlines tell us that the Dow Jones is up around 1,000 points since Donald Trump won the election on November 8th. The conventional wisdom is that this shows how much confidence people have in Trump’s ability to generate a healthy American economy. The argument is that if people are willing to buy stock in American firms, this indicates their belief that those firms will see improving profits over the next few years. They then draw the conclusion that more profitable firms indicate a healthier American economy. Although this argument is correct about stock prices reflecting an increasing belief in the profitability of US firms, it makes a major error in assuming that profitable firms necessarily mean a better economy. The Economy Isn’t A Thing First, it’s important to understand that phrases like “a healthier economy” are themselves problematic. The “economy” is not the thing we should be c...

What is the real market value of cryptocurrencies like Bitcoin? What is the real market value of cryptocurrencies like Bitcoin? The numbers used to explain the performance of Bitcoin and other cryptocurrencies are less meaningful than most assume. Cryptocurrencies are not exactly like stocks, and cryptocurrency exchanges do not work like traditional securities markets. As a result, many cryptoasset investment strategies based on conventional definitions of market share, capitalization, volatility, and trading volume are deeply flawed. Misleading numbers mean that cryptocurrency valuation and adoption are poorly understood, which creates a false perception by the media and investors about cryptocurrencies such as Bitcoin. One implication of this analysis is that Bitcoin has captured the vast majority of the long-term upside in the cryptocurrency market despite having about half the nominal market share. Most cryptocurrencies and crypto exchanges manipulate numbers in ways that publicly ...