Morgan Stanley says the true price of bitcoin might be zero

Jim Edwards

Dec. 25, 2017, 3:05 AM
364,370

The price of bitcoin as of 8.20 a.m. on December 24, after a very volatile week. Markets Insider

Even after a rough week, bitcoin is trading at around $14,400.
A recent research note from Morgan Stanley points out how hard it is to justify that valuation.
The scarcity of people willing to accept it as a means of payment indicates that its actual value might be nothing.

Morgan Stanley analyst James Faucette and his team sent a research note to clients a few days ago suggesting that the real value of bitcoin might be ... $0.

That's zero dollars. (Bitcoin stood at around $14,400 at the time of writing.)

The paper (titled "Bitcoin decrypted") did not give a price target for bitcoin.

But in a section titled "Attempts to Value Bitcoin," Faucette described why it is so hard to ascribe value to the cryptocurrency. It's not like a currency, it's not like gold, and it has had difficulty scaling. He concluded:

• Very difficult question to answer, but some points to consider

• Can Bitcoin be valued like a currency? No. There is no interest rate associated with Bitcoin.

• Like digital gold? Maybe. Does not have any intrinsic use like gold has in electronics or jewelry. But investors appear to be ascribing some value to it.

• Is it a payment network? Yes but it is tough to scale and does not charge a transaction fee.*

• Bitcoin average daily trading volume of $3bn (last 30 days) vs $5.4 trillion in the FX market.

• Est. <$300mn in daily purchase volume vs. $17bn for Visa.

Faucette backed his argument with this chart of online retailers who accept bitcoin, titled "Virtually no acceptance, and shrinking":

This is possibly the saddest bitcoin chart ever. Morgan Stanley

"If nobody accepts the technology for payment then the value would be 0," Faucette suggested.

Of course, even if bitcoin can't be used to buy goods it is still largely exchangeable for fiat currency.

*Clarification: It's not clear why Faucette wrote this, as most miners do charge transaction fees.

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Barclays will take a $1.3 billion writedown because of US tax reform

Ben Martin, Reuters

16h
1,819

FILE PHOTO: Chief executive officer of Barclays, Jes Staley, takes part in the Yahoo Finance All Markets Summit in New York, U.S., February 8, 2017. REUTERS/Lucas Jackson/File Photo

FILE PHOTO: Chief executive officer of Barclays, Jes Staley, takes part in the Yahoo Finance All Markets Summit in New YorkThomson Reuters

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Barclays will take a $1.3 billion writedown because of US tax reform.
The bank says the tax overhaul will cause its tier 1 capital to fall by about 20 basis points.

(Reuters) - Barclays expects to take a writedown of about 1 billion pounds ($1.34 billion) on its annual post-tax profit as a result of the U.S. tax overhaul, the bank said in a statement on Wednesday.

The reform to the tax system signed into law by President Donald Trump on Dec. 22 will force the British lender to reduce the value of its deferred tax assets, prompting it to take a one-off charge in its results for the 12 months to the end of December.

It will also lead to the bank's common equity Tier 1 capital ratio, a key measure of its financial strength, falling by about 20 basis points, the lender said.

Since taking the helm at Barclays in December 2015, Chief Executive Jes Staley has streamlined the bank into a transatlantic lender focused on the United States and Britain.

The restructuring has led it to exit a raft of non-core operations, such as its business in Africa and units in Asia, in a bid to simplify its structure and boost returns to shareholders.

Barclays already slumped to a 628 million pound attributable loss in the nine months to the end of September following write-offs in the wake of its exit from Africa. The 1 billion pound charge to account for the U.S. tax changes is expected to push it further into the red.

The $1.5 trillion tax overhaul is the biggest reform of the U.S. tax system since the 1980s and will see that corporate tax rate slashed to 21 percent from 35 percent.

While Barclays said the reduction in the tax rate is expected to "positively impact" its future post-tax earnings in the United States, it also cautioned that the Base Erosion Anti-Abuse Tax (BEAT), which was included in the legislation and designed to prevent multinational firms from abusing the tax code, could significantly offset that benefit.

"Due to the uncertain practical and technical application of many of these provisions, it is currently not possible to reliably estimate whether BEAT will apply and if so, how it would impact Barclays," the lender added. ($1 = 0.7463 pounds) (Reporting by Ben Martin, editing by David Evans)