Bitcoin
According to Böhme, Rainer, Nicolas Christin, Benjamin Edelman, and Tyler Moore (2015), “Bitcoin is an online communication protocol that facilitates the use of a virtual currency, including electronic payments”. Some suppose that the year 2017 can be called the year of Bitcoin. And rightly so. Laymen all over the world were amazed while witnessing an almost unprecedented surge of more than 900% in Bitcoin’s price in 2017. The simple announcement of creating own cryptocurrency by Kodak made the company’s share price rise by 60%. It seems that cryptocurrencies begin to be the embodiment of profitability. However, the question that is also of interest to the publicity that still bears in mind the pain of 2008 financial crisis is whether all the fuss around Bitcoin is just in vain and it is just another bubble just like real estate in 2000s and tulipomania in the 17th century.
Especially now when it is treated like a store value allowing speculators to make bets concerning how far it can rise. Doesn’t it sound familiar? The reason why it is considered to be a bubble by certain groups of people is due to the absence of intrinsic value to its holder except for the one assigned by the community. Nevertheless, it is still believed that in case it is a bubble there’s still room for growth while comparing with dot com bubble of the beginning of the 21st century. However, the further surge of bitcoin poses another danger. As more and more people engage with this virtual currency that has the potential to disrupt existing payment systems and perhaps even monetary systems, the higher risk of regulators’ intervention emerges. Whatever happens to Bitcoin in 2018, we have every reason to be sure that it is worth following. But be cautious, as John Maynard Keynes once said: “The market can stay irrational longer than you can stay solvent”.
Tesla
Another story worth telling is the story about Tesla that has seen the increase of 45.7% in its share price since the closing price on the last trading day in 2016. Such a surge can be attributed to the launch of Model 3 – lower cost EV. The announcement of the model 3 in 2016 resulted in roughly 325000 reservations, which implied the revenue of $14 bln. The expectation of future profits caused positive changes on the stock market. Those expectations were also accompanied by investors’ belief that the introduction of Model 3 will turn Tesla from a niche maker of expensive electric luxury cars to something more like a mainstream high-volume automaker. However, the stock of Tesla is highly susceptible to any news concerning the model making the stock highly volatile.
During the year 2017, Tesla faced challenges in terms of setting up the necessary production capacity. “Production bottlenecks” and the revelation that the desired production capacity will be postponed until the first quarter of 2018 (previously it was promised that desired level of production will be achieved by the end of 2017) brought about the fall of approximately 20% in Tesla’s share price since September of 2017. Investors also feel uncertain regarding Tesla’s plans to have a 25% profit margin on Model 3 while other automobile companies were not able to achieve such a margin on their EV. Thus, it is seen that the main challenges are only ahead of Tesla. And delivering on the capacity promises is just one of them.
EU growth
Economic development in the EU has been described by the so-called eurozone euphoria. The reason for that is the fact that, firstly, despite “Trump bump” the EU outperformed the US in terms of economic growth in the third quarter of 2017 and, secondly, 2017 proved to be the best year for the eurozone since the financial crisis.
The growth was largely driven by Germany and its exports and increased capital expenditure. Other big economies of the eurozone such as France and Italy also performed better than expected. Since such a growth rate can be considered as abnormal for the area, it also entails decreasing unemployment from 12.1 per cent in 2013 to 9.3 per cent in April of 2017. As the Phillips curve predicts, lower unemployment is associated with higher inflation.
Thus, it is no surprise that the European Central bank made a decision to decrease the amount of bonds purchased as a result of Quantitative Easing to 30 billion euros to control inflation at the acceptable level of around 2%.
