The price of Bitcoin continued achieving all-time highs when yesterday it rose to an unprecedented $11,874 on crypto currency exchanges largely fuelled by the usual South Korean rallies. Financial analysts are predicting that this will be another turbulent week for the crypto currency where it is even expected to reach another all-time high of $12,000 whilst figures of $14-15,000 are not beyond its reach by the end of the month. This is of course a prediction but the fundamentals seem to be there especially after CRM has announced that it will trade Bitcoin futures as from December 19th. It will be intriguing to observe what happens then.
Analyst: Bitcoin’s $10,000 Doesn’t Reflect its True Value
Miguel Cuneta, the co-founder at Satoshi Citadel, a major cryptocurrency-focused investment firm in the Philippines which operates some of the country’s largest bitcoin brokerates and remittance apps such as BuyBitcoin and Rebit, stated that the $10,000 hype was generated by the media earlier this month. Moments after the bitcoin price surpassed $11,000, it dropped to $9,000, and almost immediately after, the mainstream media was eager to publish a series of articles on the next bitcoin crash.
“News outlets haven’t even had 24 hours to let the ‘10k’ news simmer and it already went up to $11,500. By the time they published the ‘11K’ piece, it already dropped to $9,000. As soon as they entered the last word on their ‘Bitcoin is crashing!’ article, it’s back at $11,000 per BTC,” wrote Cuneta.
With the price of bitcoin nearly at $12,000, bitcoin is now the world’s sixth most valuable circulating currency in the world, within eight years since its launch in 2009. Hence, while the majority of mainstream media outlets and analysts in the traditional finance sector are fixated on the short-term price trend of bitcoin, Cuneta explained that bitcoin will likely become much larger than most can imagine, as it goes about separating money and state.
“So, we could be watching one of the biggest financial bubbles in history unfold with this cryptocurrency mania. Yet on the other side of the coin, there is also the non-trivial possibility that we are witnessing something remarkable happening before our very eyes — the return of the separation of cash and state,” Cuneta noted.
Currently, bitcoin is a robust store of value and an alternative to traditional assets like gold. But, with efficient scaling and widespread adoption, in the upcoming years, bitcoin will likely compete against reserve currencies and government-issued money.
Long-Term Future Beyond $12,000
Bitcoin has surpassed the $11,000 mark and is expected to surpass $12,000 within December, given the entrance of institutional investors and tens of billions of dollars in capital. As institutional money flows into the bitcoin market through bitcoin futures, the $165 billion market cap of bitcoin will increase rapidly, providing more liquidity.
The network effect of bitcoin and the dominance of the cryptocurrency will continue to attract more investors in the global finance market to bitcoin. As Cuneta added:
“Over one third of a trillion dollars. That’s the total amount of cryptocurrencies in the world. $165 Billion belongs to Bitcoin alone, which just shows how dominant network effects can be. Because of Bitcoin technology, the power to create money was granted to every human being on earth and taken away from kings, oligarchs, and governments.”
For this particular reason, several respected investors within the cryptocurrency space have expressed their optimism towards bitcoin price reaching $45,000 by the end of 2018, achieving a $1 trillion market cap.
CME Group, the $51 billion US-based financial institution and the world’s largest options exchange, is set to finalize the integration of its bitcoin futures exchange by December 17, and open bitcoin futures for trading by December 18.
CME Receives Approval From CFTC
In an official announcement, Terry Duffy, CME Group Chairman and CEO, revealed the company has received the approval from the US Commodities and Futures Trading Commission (CFTC) to list bitcoin futures and provide infrastructure around bitcoin options, derivatives, and futures contracts.
In the first few weeks of operation, traders on CME’s bitcoin futures exchange will be limited to initiating trades with an initial margin of 35 percent. Various risk management tools have been implemented onto CME’s bitcoin futures trading platform, given that it is a strictly regulated exchange overseen by the CFTC.
“Though we have worked through a lengthy, comprehensive process with the CFTC to get to this point, we recognize bitcoin is a new, uncharted market that will continue to evolve, requiring continued collaboration with the Commission and our clients going forward. At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35 percent, position and intraday price limits, and a number of other risk and credit controls that CME Group offers on all of its products.”, Duffy said
The CME bitcoin futures platform rely on the CME CF Bitcoin Reference Rate (BRR) to obtain the global average price of bitcoin based on Bitstamp, GDAX, itBit and Kraken. These four cryptocurrency exchanges are well-regulated within the US and Europe, and are fully compliant with the regulatory frameworks established by respective governments within the two regions.
CME’s Impact on Bitcoin’s Mid-Term Growth
On November 14, CCN reported that the UK-based $100 billion hedge fund Man Group has announced its official plans to invest in bitcoin and commit to the bitcoin market upon the completion of CME’s bitcoin futures exchange launch.
Man Group CEO Luke Ellis told Reuters:
“Conceptually digital currencies are an interesting thing. It’s not part of our investment universe today – it could be. If there is a CME future on bitcoin, it would be.”
Large-scale hedge funds with a market valuation of over $10 billion typically have a minimum investment threshold in the range of $300 to $500 million. Hence, if large-scale hedge funds like Man Group invest in the bitcoin market, tens of billions of dollars in institutional money will flow into bitcoin, increasing liquidity of the digital currency.
Ellis and executives of other major hedge funds such as Fidelity Investments, a US-based investment firm with $3.23 trillion assets under management, have expressed optimism in regards to the decentralized structure of bitcoin and its transparent nature which enables it to operate as a robust store of value and a fair monetary system.
“There is a big difference between a digital currency and a traditional currency…Traditional ones are supported by governments who have armies and tax men that can make people follow their rules, and digital ones don‘t. But that doesn’t invalidate digital currencies at all,” said Ellis.
As large sums of institutional money flow into the bitcoin market and companies within the traditional finance sector continues to adopt bitcoin, in the mid to long-term, the mainstream adoption of bitcoin will inevitably surge at an exponential rate.