The price of bitcoin closed last week at almost $19,500. And the higher the price goes, the more the word “bubble” is mentioned. But, for bitcoin naysayers, another thing happened last week. The first bitcoin futures were made available. And more will be offered this week. Now those naysayers can put their money where their mouths are and place those “no pass” wagers on bitcoin.
Futures Allow For A Bet On The Future
Futures, as explained by Business Insider, “allow two parties to exchange an asset at a specified price at an agreed-upon date in the future.” Last week, CBOE started allowing bitcoin futures trading. And starting this week, two additional firms, CME Group and TD Ameritrade, will offer the opportunity. CBOE was the first to roll this out, with futures trading starting December 11. CME Group and TD Ameritrade start December 18.
Past Bets Were All For A Rise, Now Short Sells Allow For A Drop Wager
Previously, a buy on bitcoin meant a gamble that the price would rise. With futures now available, people who feel strongly that the bitcoin surge is just a bubble can bet on that. In fact, bitcoin investors Cameron and Tyler Winklevoss just this week issued a challenge to JP Morgan Chase CEO, Jamie Dimon. “We’ve been working really hard to give Jamie Dimon an opportunity to short [sell] bitcoin, and anybody who says that you know, it’s a fraud or a bubble, you can go now [and] put your money where your mouth is,” said Cameron, according to Fox Business. Dimon has called bitcoin “a fraud that will ultimately blow up,” according to a September article from The Guardian.
Bitcoin Is A Gold Disruptor
Cameron Winklevoss sees bitcoin as a gold disruptor. “Gold is scarce, bitcoin is actually fixed. Bitcoin is way more portable and way more divisible [than gold],” Winklevoss is quoted from a December 9 CNBC article. “If bitcoin disrupting gold is true and it plays out…then you can see 10 to 20 times appreciation” from the market cap of $300 billion for bitcoin at the time of the quote. Since December 9, the price has appreciated approximately 30 percent. So, if what Winklevoss believes turns out to be true, there is still a lot of room for future price gains.
Not Everyone Is Bullish On Bitcoin
As hinted by the challenge to JP Morgan Chase’s Mr. Dimon, not everyone is as bullish on bitcoin as the Winklevoss twins. So, the bitcoin futures market, especially short selling, may be a busy one. However, the first week’s activity might not have equaled the initial trump blast about the market’s opening. According to the same CNBC article, “volume on the CBOE contract has been very small.” But, with CME and TD Ameritrade joining this week, the volume could certainly improve.
Bitcoin Futures Pave The Way For Other Bitcoin Financial Products
With bitcoin futures now a fact, other bitcoin products may be on their way soon. According to CNBC, “the SEC is said to be reviewing bitcoin ETFs (exchange-traded funds), but a decision is not anticipated this year.” This may be more of a general trend toward potentially more government oversight of bitcoin and other cryptocurrencies, and that may actually be a positive. Having governments more formally recognize bitcoin gives it more credibility, which makes more people pay attention to it. That can mean more market activity.
No one really knows if the bitcoin streak is legitimate or a bubble. And maybe it’s both: a legitimate new currency that may be trading above value now but will settle down in the future. One thing is sure. Cryptocurrencies are disrupting financial markets and no one knows if that disruption is either long-term or massive. We all will need to wait and see.