Bitcoin’s price has taken off again over the past 24 hours as trading of futures on the cryptocurrency’s price kicked off yesterday on Chicago’s Cboe exchange. Yesterday’s launch marks the entry of Bitcoin, and cryptocurrencies as an asset class, into the financial markets mainstream. A second exchange, the Chicago Mercantile Exchange, will start offering Bitcoin futures next Monday, December 18th.
The past few weeks particularly, though Bitcoin has been on a strong bull run all year having started January changing hands for around $1000, has seen the crypto’s exchange price rocket. The pace of the price rise, from the $4000s in October to over $16,000 today, has been absolutely unique in the history of financial markets.
This has led to widespread claims that the fervor of those investing online in Bitcoin is creating a bubble of epic proportions. Cryptocurrency advocates counter that the pace of the price rise is unique because Bitcoin’s gatecrashing of mainstream financial markets is unique and a natural by-product of entry being gained despite resistance from the ‘establishment’.
Whether Bitcoin’s price is currently in a bubble or not remains to be seen. However, Cboe’s launch at the very least appears to have been a success. So much so that the exchange’s servers crashed shortly after the launch due to the weight of traffic. Those investing online in Bitcoin futures on Cboe have reportedly been buying both January and March expiry dates, despite the relative risk of longer term bets on such a volatile asset.
Leverage of up x15 is available on Cboe’s Bitcoin futures but the exchange does have measures in place to protect itself against the unique level of volatility that characterizes the cryptocurrency’s price. At least 33% cash deposit is being required upfront for bets on the futures and enforced trading breaks triggered by movements of above 10% a day.
Those investing online by going long on the futures will no doubt be encouraged by the same trader who accurately called Bitcoin passing the $10,000 level this year not forecasting the price could reach as much as $100,000 in 2018. Dave Chapman, Managing Director of Octagon Strategy, a trading company specialized in cryptocurrencies, was quoted back in August as saying Bitcoin’s price would pass $10,000 before the end of the year.
Chapman is now putting his hat on Bitcoin reaching $100,000 before the end of next year. His bullish forecast is based on both the cryptocurency’s relative scarcity, circulation is capped at a peak of 21 million Bitcoin, and its potential to disrupt incumbent financial systems:
“Bitcoin allows the immediate transfer of value from one individual in the world to any other individual in the world, and it does that without a middle man. That’s its value”.
“If you look at bitcoin and its impact on finance, it’s really not that crazy to think that bitcoin could be an extremely huge disruptor to finance as we know it today.”
This is what he believes is the point conservative traditionalists calling bubble are missing.
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