BITCOIN DIARY: It's the Wolves of Wall Street against the Ferrets of Geekdom
'The wolves of Wall Street are unlikely to leave a juicy carcass like this to the ravages of the ferrets of geekdom'
First the swings and the roundabouts. Bitcoin has heaved itself through a few new ceilings and now hovers somewhere around the R270 000 mark in local trading:
The dramatic rise in value appears to have been triggered by Bitcoin's move onto the futures trading market.
But wait, what about those other coins in the chart?
Also surging spectacularly in recent weeks have been Litecoin an Ethereum, the only other coins traded by this particular provider, ice3x.com.
It seems that Bitcoin's rising tide lifts all crypto boats. Which does raise a question: Bitcoin could drag the entire crypto market down with it, should it lose its way.
Here's more on the futures listing on the CBOE from the Financial Times:
In early trade on the CBOE Futures Exchange, the January bitcoin contract traded as high as $18,850 to the dollar, having opened around $15,000. More than 2,500 contracts had traded hands by 1:44am in Chicago (7:44am GMT), according to CBOE data. Trading was halted twice, first for two minutes then for five, after the abrupt rise triggered ‘circuit breakers’ aimed at easing excessive volatility.
Trading was light compared with more established currencies futures. For instance, volume on the December euro-dollar contract traded on the larger CME Group exchange had already reached 26,592. Still, bitcoin futures trading was more active than some market participants had expected. Intense interest caused intermittent outages on the CBOE Global Markets website but did not affect its trade systems.
Here's a graph which shows the divergence between the Bitcoin price and the January 2018 futures price:
But, the excitement may be short-lived. Analyising Bitcoin's futures debut, a full bench of Reuters writers came to the following conclusion:
Newly launched bitcoin futures on Monday suggested that traders expect the cryptocurrency’s blistering price gains to slow in the coming months, even as it blasted above $17,000 to a fresh record high in the spot market.
Chicago-based derivatives exchange Cboe Global Markets launched the futures late on Sunday, marking the first time investors could get exposure to the bitcoin market via a large, regulated exchange.
The one-month bitcoin contract opened at 6 p.m. local time (2300 GMT) on Sunday at $15,460. By late afternoon on Monday in New York, it was trading at $18,650, roughly 8 percent above bitcoin’s spot price of $16,900 on the Bitstamp exchange.
For Bitcoin, a gain of eight percent over a month is meh, you see.
This column has observed before that the Wolves of Wall Street are unlikely to leave a juicy carcass like this to the ravages of the ferrets of geekdom. Establishment money will move in and, after cashing in on quick gains, stabilise and control the Bitcoin price. Stability with steady growth, you see, is what big investors want from their markets.
Bitcoin jokes are few and far between, but here's one from an article by Tyler Cowen on Bloomberg:
A boy asked his bitcoin-investing dad for 1 bitcoin for his birthday. Dad: What? $15,554??? $14,354 is a lot of money! What do you need $16,782 for anyway?
Seriously, though, Cowen attempts to answer the question which has pre-occupied humankind for tens of minutes: What is the fair value of Bitcoin?
Part of his answer:
One approach is to ask what role bitcoin and other cryptoassets are likely to play in global portfolios. Under one (very rough) estimate, total global wealth is about $241 trillion. Because the total value of cryptoassets has been hovering in the neighborhood of $300 billion, that constitutes about one-eighth of 1 percent of the total global portfolio. If you think of cryptoassets as taking on some of the hedging functions of gold or government securities, that valuation doesn’t sound so crazy.
To consider some other rough estimates, the total estimated value of the above-ground gold stock is about $7.5 trillion. Diverting 1 percent of gold holdings into bitcoin gets its value up to about $5,000. The current bitcoin price is several times beyond that, but a range of $15,000 to $20,000 again seems within the bounds of reason, at least to this observer. To the extent bitcoin is a store of value and a hedge, it is competing with gold more than with government fiat currencies, which ultimately are defined by their transactions uses.
Okay, I'll give away the ending: "I don’t think bitcoin is a bubble, but every morning I wake up doubting." Thanks, Tyler, for clearing that up.
And finally, an answer to the most frequently asked question in hair-dressing salons: 'Is it too late to buy Bitcoin':
Meltem Demirors, The Digital Currency Group, and Robert Shiller, Yale University, debate whether investors have missed the opportunity to buy into cryptocurrencies like bitcoin. » Subscribe to CNBC: http://cnb.cx/SubscribeCNBC About CNBC: From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more. Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Find CNBC News on Facebook: http://cnb.cx/LikeCNBC Follow CNBC News on Twitter: http://cnb.cx/FollowCNBC Follow CNBC News on Google+: http://cnb.cx/PlusCNBC Follow CNBC News on Instagram: http://cnb.cx/InstagramCNBC Is It Too Late To Buy Bitcoin? | CNBC