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November23

All I Want for Christmas is a Bitcoin

Investors will resume trading after the Thanksgiving weekend, but all eyes will be on the outcome of Cyber Monday. Last year, it was the largest online sales day in history- shoppers spent a record $3.39 billion online, edging out the Black Friday online sales. This year, Cyber Monday sales are set to grow by 16.5 percent from a year ago, according to Adobe Digital.

Although it feels like it has been around forever, prior to 2005, there was no Cyber Monday. A marketing team at Shop.org, a division of the National Retail Federation, conceived of the day, after data showed that the Monday following Thanksgiving was one of the most popular online shopping days of the year. Researchers believed this was due to the fact that many people had spent the holiday weekend window shopping, and when Monday came around and they returned to work and promptly used their employers’ high-speed Internet connections to go online to buy what they liked or weren’t able to get on Black Friday.

Seizing on the data, the group coined the phrase “Cyber Monday,” to provide online retailers with a catchy hook to match the brick-and-mortar shopping frenzy fueled by mention of Black Friday savings. By coupling the catchy phrase with sales and promotions, Cyber Monday has become the busiest day of online shopping of the year.

BitCoin Bonanza: A couple of weeks ago, I noted that the current bull market in stocks lacked investor euphoria. Well, if you are looking for that emotional high, it’s time to talk about BitCoin. One component of a frenzied mania is when ordinary people start asking me questions about an asset class. When a makeup artist at CBS recently grilled me about BitCoin, I knew that it was time for a refresher.

I started covering Bitcoin almost five years ago, when it traded above $1,000. At the time, it was a wonky, weird, pseudo-currency used to pay for drugs, through a cyber-black market. Now that it has poked above $9,000, it’s time for a Bitcoin cheat sheet.

What is BitCoin? It is a peer-to-peer digital currency, which was launched in 2008 by an anonymous group of software developers. The currency is generated through a complicated, open computer program, and users “mined” Bitcoins by solving mathematical problems and were issued Bitcoins in exchange.

How did people get their hands on BitCoins? At first, anyone with a computer could download and run the BitCoin software. Today, mining BitCoins (and the other Bitcoin-like alternatives) requires powerful computers. The way that most people now get them is via payment for goods or services; by purchasing them through a variety of Bitcoin exchanges or by exchanging them with someone directly.

That’s set to change. After the SEC rejected a Bitcoin ETF earlier this year, the Chicago Mercanitle Exchange is about to start trading Bitcoin futures, enabling investors to bet on the coin’s future without physically owning it.

Who oversees Bitcoin? There is no central bank or government that backs Bitcoin — it is completely independent. As distrust of financial institutions soared after the financial crisis, the concept of a non-bank related way to conduct commerce was seen by many early adopters as a positive. From a consumer perspective, this is a problem, because crypto currencies are unregulated and therefore, prone to fraudulent schemes.

Beside the mania, what are the practical applications of digital currencies? This is where the conversation gets interesting. The technology that powers Bitcoin is called “Blockchain,” which allows a network of computers to agree at regular intervals on the true state of different types of shared data, like transaction records. This so-called “distributed ledger,” is like a single, secure set of books, shared by many. That’s why the technology is interesting to the financial services industry, like credit card and payments companies as well as securities firms.

Should I jump on the Bitcoin bandwagon?

The returns are tantalizing: Bitcoin is up over 750 percent this year and has soared an astounding 8,000 percent over the past five years. If you’re the type of person who likes to gamble, can take extreme price fluctuations and can afford to lose what you invest, go for it. Although some have argued that Bitcoin should be treated like any other asset class, it has not yet matured enough to be treated like a stock or bond. Until there is more regulatory oversight and plenty of consumer protections, stick to your diversified portfolio!

  • Posted by Jill Schlesinger
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