Menu IconA vertical stack bitcoin trade history three evenly spaced horizontal lines. Count large fund managers among those unable to resist the allure of bitcoin’s massive returns.
629 billion, according to a survey conducted by Bank of America Merrill Lynch. September said they viewed being long bitcoin as the most crowded position. But while bitcoin has seen unbelievable gains in recent months, its price has fallen from a record high reached on September 1 amid a Chinese crackdown on cryptocurrency exchanges. Further, Nobel-winning author Robert Shiller, who predicted the two biggest speculative markets in recent history, recently doubled down on his view that bitcoin is a bubble in an interview with Quartz. BAML’s survey shows large fund managers have yet to heed his warning — a choice made at their own potential peril.
Rounding out the top three most crowded trades in BAML’s study is the short US dollar trade. The prevalence of shorting the dollar marks a major shift for fund managers, for whom going long the currency was the number one investment as recently as April, capping off a five-month streak as the most packed trade. Get the latest Bitcoin price here. Bitcoin keeps coming back in the headlines. With any Bitcoin price change making news and keeping investors guessing.
In countries that accept it, you can buy groceries and clothes just as you would with the local currency. Bitcoin is divorced from governments and central banks. It’s organized through a network known as a blockchain, which is basically an online ledger that keeps a secure record of each transaction and bitcoin price all in one place. Every time anyone buys or sells bitcoin, the swap gets logged. Several hundred of these back-and-forths make up a block.
No one controls these blocks, because blockchains are decentralized across every computer that has a bitcoin wallet, which you only get if you buy bitcoins. True to its origins as an open, decentralized currency, bitcoin is meant to be a quicker, cheaper, and more reliable form of payment than money tied to individual countries. A 2015 survey showed bitcoin users tend to be overwhelmingly white and male, but of varying incomes. The people with the most bitcoins are more likely to be using it for illegal purposes, the survey suggested.
Each bitcoin has a complicated ID, known as a hexadecimal code, that is many times more difficult to steal than someone’s credit-card information. And since there is a finite number to be accounted for, there is less of a chance bitcoin or fractions of a bitcoin will go missing. But while fraudulent credit-card purchases are reversible, bitcoin transactions are not. Bitcoin is unique in that there are a finite number of them: 21 million.
Satoshi Nakamoto, bitcoin’s enigmatic founder, arrived at that number by assuming people would discover, or “mine,” a set number of blocks of transactions daily. Every four years, the number of bitcoins released relative to the previous cycle gets cut in half, as does the reward to miners for discovering new blocks. The reward right now is 12. As a result, the number of bitcoins in circulation will approach 21 million, but never hit it. This means bitcoin never experiences inflation.