The world’s largest crypto currency Bitcoin continued breaking all records on Sunday evening and this morning when it rose to a high of $18,500 before retreating slightly to the $16,000 mark but it is still climbing as this article is being written. This is undoubtedly due to the launch of CBOE’s Bitcoin futures index which have indicated the price rising to around $20,000 for the foreseeable future. Investors were piling on to the bandwagon with the price of Bitcoin rising by $3,000 in a matter of a few hours.
This positive improvement in the price of Bitcoin also saw a correspondent increase in the value of other crypto currencies which all posted substantial gains early on Monday. Litecoin was up over 15% whilst Ethereum and Ethereum Classic jumped 6 and 12% respectively with Bitcoin Cash also gaining well over 7%. Dash returned to positive territory with a 7% increase whilst Monero also saw huge gains.
Within three hours after its listing of bitcoin futures, the website and online trading platform of the Chicago Board Options Exchange (CBOE) were inaccessible, due to an unexpected spike in demand and volume.
According to Tokyo-based technology journalist Yuji Nakamura, CBOE bitcoin futures processed $401,600 worth of trades within the first 20 minutes.
Only the Beginning, Billions Expected to Flow Into Bitcoin Market
Upon its debut earlier this year, the US Commodities and Futures Trading Commission (CFTC)-approved bitcoin derivatives, futures, and options exchange LedgerX announced that it had settled $1 million throughout its opening week, a period in which the exchange planned to clear minimum volumes to test the system.
A similar situation had occurred with CBOE during the first few hours since its listing of bitcoin futures. A sudden spike in volume and demand from institutional investors and retail traders in the traditional finance industry led the CBOE trading platform to become inaccessible for a brief period.
Over the next few weeks, institutional investors and investment firms with hundreds of billions of dollars in capital are expected to invest in the bitcoin market. Given that large-scale hedge funds are restricted to invest a minimum value of a few hundred million dollars, it is likely that in the short-term, billions of dollars will be invested in bitcoin.
Throughout the past month, several analysts expressed their concerns over the possibility of shorting bitcoin at a larger scale through bitcoin futures and CBOE’s futures exchange. Some analysts claim that excessive shorting of bitcoin could lead the price of the cryptocurrency to plunge.
However, as Zerohedge reported on December 11, investors have been paying premiums to invest in bitcoin. Currently, the price of bitcoin futures is up by over 20 percent since open. XBT/F8, the main bitcoin futures contract listed on the CBOE’s trading platform, is being traded at over $18,210, with a premium of $1,960.
Mid to Long-Term Trend
Based on the performance of bitcoin futures on the CBOE exchange over the past 6 hours, it seems evident that the demand for bitcoin from the traditional finance market is increasing at an exponential rate.
As BitMEX business development head Gwen Dwyer and JPMorgan global markets strategist Nikolaos Panigirtzoglou have noted throughout this week, the introduction of bitcoin futures to the global finance market will further solidify bitcoin as a major asset class by increasing its liquidity and stabilizing its market.
“In all, the prospective introduction of bitcoin futures has the potential to elevate cryptocurrencies to an emerging asset class. The value of this new asset class is a function of the breadth of its acceptance as a store of wealth and as a means of payment and simply judging by other stores of wealth such as gold, cryptocurrencies have the potential to grow further from here,” said Panigirtzoglou.
On December 18, another major options exchange CME Group, the second largest exchange in the global market behind CBOE, is scheduled to list bitcoin futures. Several hedge funds including the $95 billion Man Group have already announced that they plan to commit to bitcoin investment upon CME’s launch of its bitcoin futures exchange in the next few weeks.
Kenetic Capital managing partner has said that he expects bitcoin to reach $50,000 by the end of 2018 as the cryptocurrency market becomes globally accepted.
Speaking on Bloomberg TV, Jehan Chu, said:
I think we’re going to see $50,000 by the end of 2018 for bitcoin. I think with the one-two punch with the Cboe and CME I think the entire world is on watch now for what is to come and what the real liquidity that can enter this market will actually look like.
Chicago-based exchanges Cboe and CME are to launch their bitcoin futures contracts later this month, which are helping to boost the price of the market up to record highs. Just today, it was reported that the cryptocurrency had risen by 10 percent, nearing the $13,000 barrier.
Speaking about how digital currencies are perceived in Asia compared to the U.S., Chu argued that the Asian market is a lot more ‘nimbler’ than its counterpart, including that of China despite its crack down on initial coin offerings (ICOs) and domestic digital currency exchanges.
Interestingly, he stated:
China is actually one of the fastest to adopt at an enterprising level blockchain technology.
He’s also of the opinion that efforts by the PBoC to develop its own cryptocurrency lends a lot of weight to the validity to digital currency at a sovereign level generally, adding:
I think in 2018 we will see the first state-backed digital currency in one form or another and I bet you it will come from Asia.
When questioned as to whether South Korea has become interested in the cryptocurrency space because of North Korea and its use of bitcoin as a safe haven, Chu replied in the negative. According to him, South Korea is focusing on this space because ‘they have a culture of trading.’ As they are familiar with trading Forex and stocks, Chu thinks that trading in digital currencies makes for an easy transition.
I’m not sure it has a lot to do with politics between the North and the South, but I do think that anywhere that you see a population which is comfortable with trading like Japan, like Korea, and even Hong Kong to a degree, and specially recreationally in China you’re going to see a lot of interest in cryptocurrency and I see that growing exponentially.
Billionaire hedge fund manager Mike Novogratz is another bullish individual on the price of bitcoin. Last month, he said that it could ‘easily‘ reach $40,000 by the end of 2018.