The New ".com"
Is Bitcoin a bubble? Could be:
Remember back in the late 90s when companies would do just about anything to associate themselves with the internet? Add .com to something and it would pop. The modern equivalent would seem to be doing something - anything - with bitcoin.
Overstock has, over the years, had only a passing, temporary relationship with profitablity. They have recently done a somewhat better job of getting some revenue to the bottom line but the most recent quarter once again showed losses - due to startup costs at their cryptocurrency trading unit. Why does a retailer have a cryptocurrency trading unit? Darned if I know but, hey, retail's a tough business right now so why not?
Overstock has been accepting bitcoin since 2014 and its policy from the beginning was to convert 90% of sales in bitcoin to dollars and keep the rest in bitcoin. So theoretically at least, Overstock has been accumulating bitcoin since 2014 when it was a lot cheaper than it is now. Unfortunately for Overstock, there doesn't appear to be a lot of transactions in bitcoin at Overstock as you won't find a lot of it on their balance sheet. Bitcoin appears to be some kind of extreme proof of Gresham's Law, where good money - that would be Bitcoin I guess - is hoarded while the inferior product is spent, US dollars in this case.
And Overstock has changed its policy to reflect the reality that you don't want to spend the money that is soaring in value, now converting only 50% of Bitcoin revenue to dollars. They also announced last month that they will start accepting other forms of cryptocurrency on the theory I guess that one ought not keep all one's digital eggs in one digital basket. Diversify, diversify, diversify!
So, anyway, Overstock's stock has been soaring of late, nearly doubling since the beginning of August. Some of that was from old fashioned jawing by the CEO. He recently opined aloud that if the market didn't recognize his genius and start bidding up his stock then maybe it might be an opportunt time to take the company private. The stock popped on that because, hey, there's PE money for just about anything right now. But the rest of the gain appears to be directly related to the company's Bitcoin activities. Those aren't profitable of course, but who cares? It's Bitcoin! It's new! It's shiny! It's going up in price! Did I mention it's going up in price?
I don't know if Bitcoin is a bubble. I actually don't like that term. Asset prices that are later declared bubbles make perfect sense right up to the point where they don't. But the price rise and the excitement associated with anything cryptocurrency does point to a bit of irrational exuberance creeping into the blockchain zeitgeist.
As for Overstock, Patrick Byrne (CEO) is either a genius or still trying to punish the short sellers who routinely circle his stock. Personally, I kind of like the guy. He's part P.T. Barnum for sure but that's a compliment in my book. And anyone who keeps not only Bitcoin but gold and silver on his balance sheet is certainly more interesting that the average CEO of a publicly traded company. So if you believe in the guy and what he's doing with cryptocurrencies - and you understand that world better than I do - maybe Overstock is worth a look but beware because you'll have to pay up to participate (see chart below). But if you are looking for a consistently profitable retailer, well, you might want to look elsewhere.
