Wall Street rebounded from last week’s retreat with a nearly 2% advance over the last five days, and the S&P 500 is now only 0.8% from its record intraday high. It was a week marked by steady gains, geopolitical tensions arising from developments in the ongoing war between Russia and Ukraine, Nvidia’s quarterly results, and a furious rally in bitcoin that has seen the world’s largest cryptocurrency flirt with the $100K milestone.
Nvidia delivered quarterly revenue that nearly doubled Y/Y and data center revenue that climbed to a record ~$31B. However, the company’s current quarter revenue outlook came in lower than some of the loftiest expectations. But the stock rebounded on Thursday and eventually ended higher. The story of the week was, no doubt, bitcoin.
For the week, the S&P climbed 1.7%, while the Nasdaq Composite also added 1.7%. The Dow gained 2.0%.
Future Wealth’s View
All eyes are on $100,000 Bitcoin as the token hit a new high of $97,892 on speculation Donald Trump’s support for crypto will mean friendlier regulation. His team is even considering whether to create a new White House post solely dedicated to crypto policy.
For those who missed the run up, we ask the simple question – “How does one place a value on bitcoin?” The popular and likely the only answer is “based on supply and demand”. With no assets, no cash flow, no balance sheet or income statement, it is simply what one is willing to pay. Another name for this strategy is called “The greater fool theory”.
The greater fool theory suggests that you can make money by buying overvalued assets and then selling them for a higher price. The theory is based on the idea that there will always be someone else, called a “greater fool”, who is willing to pay more than you did. It all works until it doesn’t. There has been a history of greater fools that extends back from the Tulip mania to the internet bubble to the housing bust that caused the financial crisis.
But, of course, some never learn. Bitcoin investors are stuck in a perpetual boom and bust cycle where they get back on the bitcoin horse every few years only to get burned. Don’t be one of them.