Helena Izotova
The first Bitcoin futures were finally launched in the USA. However, despite the fact that cryptocurrencies have already been recognized a part of the financial world, skeptics still don’t believe in them and anticipate a cryptocurrency market crash.
So, the Bitcoin futures launch seems to have become another major step towards recognizing cryptocurrencies as major financial assets. After the launch in the USA, the German exchange is planning to launch Bitcoin futures as well. At the same time, market participants predict that Bitcoin will reach $40000 per 1BTC in 2018. At the same time, the skeptical part of the international expert community thinks that Bitcoin futures is going to make the entire cryptocurrency bubble burst in the near future.
At the same time, really big players like JP Morgan and Citigroup haven’t joined in yet. Most likely, they are afraid of uncertain, unpredictable, and extremely volatile market vulnerable to various technical breakdowns. Trading veterans remember the crash of mt.gox, a Tokyo-based exchange, in 2014. Instantly after this, the BTC exchange rate crashed by 30%. Should major American, Asian, and European players participated back them, the scale of the disaster would have been hard to imagine.
Major players are evaluating the first results of the Bitcoin futures trading.
It well may be that the so-called “whales” (big-scale players or the “smart money”) are still waiting for the first CBOE Bitcoin futures to start expiring on January 17th, 2018. Some experts seriously doubt that the contracts will actually be fulfilled as expected. The thing is, there is a huge gap between the futures cost and the actual BTC rate. For some futures, the gap is more than $1000 per each Bitcoin. To tell you the truth, with some other underlying assets, the difference between the futures and the actual rate may be considerable as well, but hardly to that extent.
The second problem is closely connected with the decentralized nature of cryptocurrencies. When it comes to Bitcoin futures, the CBOE relies on Gemini, an U.S.-based online exchange owned by the famous Winklevoss twins, the world’s first Bitcoin billionaires.
Given the current buying craze on Asian exchanges, the current rates on those exchanges and Gemini may differ considerably. So, the problem is, the owners of those first Bitcoin futures may make Bitcoin crash right before the expiration date to buy it cheap and then resell it in Asia.
There is no denying the fact that such manipulations may trigger market panic leading to a market crash. By the way, this is how mt.gox crashed in 2014. Back then, the online exchange went bankrupt after a hacker attack that trigger a huge sellout of Bitcoin. Potential big-scale investors also don’t like the fact that several hundred Bitcoin owners are actually capable of setting and changing market trends. The thing is, around 40% of the global Bitcoin stack is owned by a thousand individuals. This is something you won’t find anywhere in any other conventional financial market. Since the Bitcoin market cap is not that big compared to other financial markets out there, the asset itself become too vulnerable to various kinds of manipulation.
Another peculiarity of cryptocurrencies in general and Bitcoin in particular is reduced liquidity since you won’t be able to sell really big loads of cryptocurrencies in an instance and at a fixed price, the way you can do it in many other conventional financial markets. So, the futures market is really capable to change the way digital currencies circulate in the digital world. On the one hand, hedge funds may be potentially interested in shorting Bitcoin since this can create a tool to balance the market and prevent bitcoin form growing infinitely. On the other hand, the market situation can see a negative change if really big players really want it. The can start going bullish on those Bitcoin futures, which will eventually make Bitcoin crash after failing to withstand the huge pressure.
With that being said, cryptocurrencies still remain unstable and uncertain. Despite the enthusiasm with which some market players have been loading up on cryptocurrencies, these digital assets are yet to prove their consistency to really big players.
Goldman Sachs experts assume that it’s too early to talk about Bitcoin’s ability to oust the conventional safe0haven asset, which is gold. Major bankers have been disputing with successful Bitcoin investors, who claim that Bitcoin is digital gold, and the BTC exchange rate will reach $40000 in 2018. Goldman Sachs experts think this comparison is childish. They say that 300 billion dollars of the Bitcoin market cap is nothing compared to 8 trillion dollars of the gold market cap.
So, big bankers and Bitcoin enthusiasts don’t agree with each other. The bankers are skeptical, and sometimes even hostile to digital currencies. The enthusiasts say that it’s just that the bankers aren’t getting any benefit from those digital currencies yet. Moreover, bitcoin and other cryptocurrencies threaten the conventional financial and banking systems as we know them. That’s why they have to behave like that. Actually, the hostile reaction is coming from the world’s leading banks while outsiders start adopting them already.
Helena Izotova
