Grant's Interest Rate Observer: Is Bitcoin Another Beanie Baby Bubble?

Beanie babies redux

First came bitcoin, then came ICO’s, now comes: Cryptokitties, an ethereum-based game in which users spend real money to “buy, sell, and breed cartoon kittens.” Launched just last week, the game already represents 20% of all computations on the ethereum network.   So far, the top-selling cryptokitty fetched just under 247 ethereum tokens, worth $117,712 at the time of purchase. 

Grant’s contacted Zac Bissonnette, author of “The Great Beanie Baby Bubble” and paid-up subscriber, for his professional opinion on this bourgeoning digital collectible craze. 

Cryptocurrencies have vastly more in common with collectibles than with investments. 

There’s no utilitarian value, they don’t generate cash flows, and their value is entirely dependent on artificial scarcity—like baseball cards, Thomas Kinkade prints, comic books, etc.—all of which are categories with exceptionally poor long-term track records. Crypto kitties are a nice way of demonstrating the similarity: Once you attach cryptocurrencies to pictures of cute animals, you realize it’s a lot like a plush toy.