George Soros dumps his bank stocks while Bitcoin grows aggressively

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George Soros dumps his bank stocks while Bitcoin grows aggressively

Author: Ivan Raszl
Date: Saturday, January 4, 2014 - 22:45

George Soros
According to several news sources billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares. Billionaire John Paulson dumped 14 million shares of JPMorgan Chase (appr. 750 million dollars). Other billionaires are pulling out of US stocks too.

We can only speculate about the reasons why this is happening but surely there is a growing discomfort about the all time high levels of stock market prices. Some are expecting a massive correction. Even if there is no good reason for it, fear could make such predictions a reality.

At BitcoinOwl we of course speculate that the growing success of crypto currencies and their promise to revolutionize the financial and other systems could be a factor as well. Just like email threatened the business model of the postal services and file sharing scared the music labels, crypto currencies without a doubt cause some anxiety to financial institutions who see Bitcoin as a competitor instead of an opportunity to reinvent themselves.

It may take years before Bitcoin makes any noticeable dent in Citigroup's profits, but Bitcoin's existence alone raises some uncertainty about the future of such financial institutions and their profit margins. Some players like Western Union have already been forced to drop their fees drastically in response to Bitcoin's extremely low transaction fees.

The question is where does all that money pulled out of the stock market will go? Many investors like Kevin O'Leary publicly said that they've put a few percents of their money into Bitcoin already. His Bitcoins were without a doubt his best performing asset in 2013. It's likely that most billionaires pulling out of the stock market will put a small part of their wealth into crypto currencies as it's highly independent from other assets which is important for healthy diversification.

Let's just see how much money are we talking about. Let's assume only a fraction of those stock dollars will be funnelled into cryptos. Half percent of NYSE's total market cap is 83 billion dollars.

If 70% of that 0.5% would flow into Bitcoin it would increase BTC's market capital 7 fold raising the price of Bitcoin to over $5,000. If 10% of it went to Litecoin it would increase LTC's market capital by 13 times raising the price to $325. And we're talking about just 0.5% of one stock exchange in the world.

Potentially it is also possible that the crash of stock market prices will scare crypto currency investors too. Although, it's hard for me to find a plausible reason why this would happen.

It will be interesting to see how the predicted decline in the stock market will influence the valuation of the popular crypto currencies.