If you have been following all the news around cryptocurrencies, you might have had a rollercoaster of emotions. At its peak, Bitcoin reached around $20,000 only to come crashing all the way down to less than $3,000 a few months afterwards. With 20/20 hindsight, you could have made an absolute killing, getting into it and out of it at the right time. But the same thing can be said about Apple, for example.
The reason why the cryptocurrency case is so compelling is because:
1) it happened in a relatively short amount of time and
2) how global its appeal was, even among non-professionals. There are some horror stories to be found across the globe of amateurs, or people who don’t usually deal in a financial and speculative market, selling their assets to get into the Bitcoin game in most cases with disastrous results.
One can argue that the Bitcoin case was the perfect storm of technology, creating this modern-day gold rush, powered by a global fear of missing out (FOMO). Technology obviously created the possibility for the concept of blockchain cryptocurrency, but social media and the push by savvy (some would suggest predatory) internet entrepreneurs magnified something that would have been confined to the dark corners of the internet otherwise and turned it into a global obsession.
And as this is written, Bitcoin is still very much alive, finding different ways to settle into the financial market as a whole. The Bitcoin case is a perfect example of how tech is now dominating the financial markets, even if we don’t notice it on a surface level.
Take real estate, for example. Always a stalwart in the investing world with house prices ever on the rise. According to many, investing in the real estate market is still a safe bet. Tech has been firmly creeping into this market over the years. One of the more fundamental ways tech has been challenging the real estate market is straight at its core. Online platforms are challenging the way houses are being sold, bypassing the need for a real estate agent and bringing buyer and seller together directly. In addition to this, the way financial institutions are deciding on consumer mortgages is more and more affected by AI, making it more straightforward for people to get funding for their houses. It might not be as explosive as the Bitcoin saga, but one could look at the real estate market ten years from now and wonder how we ever did it differently.
The whole stock market has waited with bated breath for the Bitcoin story to run its course. With the rollercoaster the way it has been, many traders will have heaved a sigh of relief when Bitcoin came tumbling down and underscored the extremely speculative nature of it. The stock market as we know it lives another day, or does it?
For most exchanges, the floor traders are all but gone, and most of the traders do their work from behind the desk peering at a multitude of monitors. As multinational companies operate in a web of countries, so do their complexities. With instability in one country, whole supply chains can be interrupted, hurting the bottom line of a company.
Traders are having to analyse increasingly complex systems, taking all micro and macro changes into account. It’s getting to a point now where it’s not hard to see that AI is going to take over at one point. The ability of the machine to uncover complex interaction between a multitude of factors, without it needing to be input by a human, seems to be the holy grail every investing company is after. It’s no wonder that the whole industry is investing heavily in this, next to a healthy army of ‘quants’ and data scientists.
Anyone who thinks that we can still trade stock based on some thorough desk research, common sense and a bit of gut feel is not wrong. However, investors might see better results on the dollar elsewhere.