In Goldfinger, James Bond faces a plot to irradiate the bullion in Fort Knox and squeeze the price of gold higher. In Live and Let Die, the baddie wants to flood the market with heroin and drive prices lower. Five days after the $500m heist of XEM virtual currency from Japan’s Coincheck exchange, the market still has not decided which Bond script we are seeing.
The survival of Coincheck, which until recently lured household investors by advertising its services on primetime television and large billboards in Tokyo, is among many unknowns created by the theft. But Jeff McDonald, vice-president of the NEM foundation that issues the XEM currency, highlights the Bond plot price conundrum. If, as the foundation has suggested, the stolen coins are tagged and removed from the market, the value of what remains could jump. If that does not happen and the hackers dump their virtual loot, XEM prices could be in real trouble.
Since the theft emerged on Friday, XEM trading has reflected that bipolar uncertainty — first with a cliff-edge dive, then a steep rally. Prices, though trending lower on Monday, are now back in a pre-heist range awaiting more facts. But should mainstream investors care? Coincheck is not the biggest exchange, XEM is not the largest virtual currency and, along with the rest of the crypto story, there is a view that the whole enterprise is illusory anyway.
Becoming harder to ignore, though, is the effect of the cryptocurrency boom on Japanese households (who trade a lot of the stuff) and their broader appetite for risk. When Nomura analysts published a report in late December suggesting that the wealth effect of the bitcoin run-up could produce a material positive impact on consumption in the first quarter of calendar 2018, it seemed punchy and speculative. But individuals transacted 15 per cent more equity trades in 2017 than the previous year. And yesterday, when the publishers of the Kaisha Shikiho — the retail investors’ bible of stocks — said that sales of the latest edition were up 50 per cent from a year earlier, the thesis that cryptocurrencies have given Japan a greater taste for mainstream risk assets became more plausible. Japan’s prime minister, who has long hoped for just such a transformation, may be praying for XEM to follow the Goldfinger script.
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