This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/technology/2017/dec/11/bitcoin-bubble-warnings-futures-contract-trading-chicago
The article has changed 12 times. There is an RSS feed of changes available.
| Version 9 | Version 10 |
|---|---|
| Bitcoin bubble warnings issued as futures trading opens in Chicago | Bitcoin bubble warnings issued as futures trading opens in Chicago |
| (4 months later) | |
| Bitcoin has taken a step toward legitimacy with the launch of a product on a Chicago exchange that allows investors to take bets on its price in the future. | Bitcoin has taken a step toward legitimacy with the launch of a product on a Chicago exchange that allows investors to take bets on its price in the future. |
| The new contract on the Chicago Board Options Exchange came as the digital currency jumped another 10%, sparking fresh warnings of a speculative bubble after last week’s 40% climb in price. | The new contract on the Chicago Board Options Exchange came as the digital currency jumped another 10%, sparking fresh warnings of a speculative bubble after last week’s 40% climb in price. |
| Bitcoin was trading at $16,200 – up 10% on the day – while the new futures contract trading in Chicago showed that traders were expecting the cryptocurrency to be trading at even higher prices in January. | Bitcoin was trading at $16,200 – up 10% on the day – while the new futures contract trading in Chicago showed that traders were expecting the cryptocurrency to be trading at even higher prices in January. |
| The futures contract trading on the CBOE allows traders to take bets – or to protect themselves – on the price of bitcoin next month. It started trading just before midnight (in London) on Sunday at $15,460, hit a high of $18,700 and then dropped back to $17,800. | The futures contract trading on the CBOE allows traders to take bets – or to protect themselves – on the price of bitcoin next month. It started trading just before midnight (in London) on Sunday at $15,460, hit a high of $18,700 and then dropped back to $17,800. |
| Such was the price volatility when the contract launched that trading had to be halted twice through so-called circuit breakers and the CBOE had to admit that its website was creaking because of the heavy traffic although its trading platform kept working. | Such was the price volatility when the contract launched that trading had to be halted twice through so-called circuit breakers and the CBOE had to admit that its website was creaking because of the heavy traffic although its trading platform kept working. |
| Due to heavy traffic on our website, visitors to https://t.co/jb3O722hoo may find that it is performing slower than usual and may at times be temporarily unavailable. All trading systems are operating normally. | Due to heavy traffic on our website, visitors to https://t.co/jb3O722hoo may find that it is performing slower than usual and may at times be temporarily unavailable. All trading systems are operating normally. |
| The launch of the contract on a regulated exchange is regarded as a sign that bitcoin is becoming more mainstream rather than currency associated with technology experts and even criminals. | The launch of the contract on a regulated exchange is regarded as a sign that bitcoin is becoming more mainstream rather than currency associated with technology experts and even criminals. |
| Daniele Bianchi, assistant professor of finance at Warwick Business School, said: “Although it has been thought of as a peer-to-peer payment system, it is evident that bitcoin is gaining more and more legitimacy as an asset class. Today’s launch of bitcoin futures has the potential to add further momentum and thus increase the appeal of the cryptocurrency to both institutional and retail investors.” | Daniele Bianchi, assistant professor of finance at Warwick Business School, said: “Although it has been thought of as a peer-to-peer payment system, it is evident that bitcoin is gaining more and more legitimacy as an asset class. Today’s launch of bitcoin futures has the potential to add further momentum and thus increase the appeal of the cryptocurrency to both institutional and retail investors.” |
| Volume in the futures contract was low: according to calculations by Breakingviews, it was roughly $50m (£37m), less than 0.5% of actual bitcoins. | Volume in the futures contract was low: according to calculations by Breakingviews, it was roughly $50m (£37m), less than 0.5% of actual bitcoins. |
| Bitcoin – created in the aftermath of the financial crisis as a way to avoid using banks – started the year trading at $966 and its meteoric rise this year has led to comparisons with the dotcom bubble in 2000 and the 17th century tulip bubble. | Bitcoin – created in the aftermath of the financial crisis as a way to avoid using banks – started the year trading at $966 and its meteoric rise this year has led to comparisons with the dotcom bubble in 2000 and the 17th century tulip bubble. |
| Bitcoin is the first, and the biggest, “cryptocurrency” – a decentralised tradeable digital asset. Whether it is a bad investment is the big question. Bitcoin can only be used as a medium of exchange and in practice has been far more important for the dark economy than it has for most legitimate uses. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption – or regulation. That means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it is hard (but not impossible) to trace a bitcoin transaction back to a physical person. | Bitcoin is the first, and the biggest, “cryptocurrency” – a decentralised tradeable digital asset. Whether it is a bad investment is the big question. Bitcoin can only be used as a medium of exchange and in practice has been far more important for the dark economy than it has for most legitimate uses. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption – or regulation. That means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it is hard (but not impossible) to trace a bitcoin transaction back to a physical person. |
| One of a number of cryptocurrencies, bitcoin is not regulated and is controlled by a network of computers that update all transactions which take place on a variety of trading platforms around the world. It only exists digitally and is “mined” using mathematical equations. | One of a number of cryptocurrencies, bitcoin is not regulated and is controlled by a network of computers that update all transactions which take place on a variety of trading platforms around the world. It only exists digitally and is “mined” using mathematical equations. |
| But on Monday, a top central banker said the European Union should look at the possibility of regulating bitcoin because of the risk of money laundering. Speaking in Vienna, Ewald Nowotny, said: “Simply because of the scale, it is certainly increasingly necessary to discuss whether and in what form regulations are needed here.” | But on Monday, a top central banker said the European Union should look at the possibility of regulating bitcoin because of the risk of money laundering. Speaking in Vienna, Ewald Nowotny, said: “Simply because of the scale, it is certainly increasingly necessary to discuss whether and in what form regulations are needed here.” |
| Nowotny, Austria’s central bank governor and also involved in setting interest rates at the European Central Bank, added: “A particular aspect that needs to be discussed ... is the question of how far the regulations on money laundering ... are relevant here.” | Nowotny, Austria’s central bank governor and also involved in setting interest rates at the European Central Bank, added: “A particular aspect that needs to be discussed ... is the question of how far the regulations on money laundering ... are relevant here.” |
| His remarks come after warnings from other senior bankers about the risks associated with bitcoin. Last week, Howard Davies, chairman of Royal Bank of Scotland, had said the sign should be put up from Dante’s Inferno – “Abandon hope all ye who enter here” – while Jamie Dimon, the head of JP Morgan, has talked about bitcoin as being worse than tulip mania and potentially used by “a drug dealer, a murderer, stuff like that”. | His remarks come after warnings from other senior bankers about the risks associated with bitcoin. Last week, Howard Davies, chairman of Royal Bank of Scotland, had said the sign should be put up from Dante’s Inferno – “Abandon hope all ye who enter here” – while Jamie Dimon, the head of JP Morgan, has talked about bitcoin as being worse than tulip mania and potentially used by “a drug dealer, a murderer, stuff like that”. |
| The latest surge of excitement in the world of cryptocurrencies came over the weekend when the Chicago Board Options Exchange launched futures trading for bitcoin for the first time. | The latest surge of excitement in the world of cryptocurrencies came over the weekend when the Chicago Board Options Exchange launched futures trading for bitcoin for the first time. |
| Futures contracts allow investors to agree to buy a certain amount of a commodity, bond or share at a specific price at a designated time in the future, hence the name. It means investors can bet on whether they believe a particular commodity – in this case bitcoin – will rise or fall by a specified future date. They are generally used in commodity markets to hedge against major fluctuations in prices, such as unexpected weather conditions hitting crops. But they are also well established in equity markets, with trading on individual companies and indices such as the FTSE 100 and S&P 500. | Futures contracts allow investors to agree to buy a certain amount of a commodity, bond or share at a specific price at a designated time in the future, hence the name. It means investors can bet on whether they believe a particular commodity – in this case bitcoin – will rise or fall by a specified future date. They are generally used in commodity markets to hedge against major fluctuations in prices, such as unexpected weather conditions hitting crops. But they are also well established in equity markets, with trading on individual companies and indices such as the FTSE 100 and S&P 500. |
| There are risks, mainly when investors use debt to finance their futures speculation and their bet goes the wrong way. | There are risks, mainly when investors use debt to finance their futures speculation and their bet goes the wrong way. |
| As the new futures contract was launched, analysts at Swiss bank UBS said “cryptocurrencies are a bubble”. Paul Donovan, global chief economist at the Swiss bank’s asset management arm, said futures on tulip bubbles were launched in 1636. The tulip bubble did not burst until February 1637. | As the new futures contract was launched, analysts at Swiss bank UBS said “cryptocurrencies are a bubble”. Paul Donovan, global chief economist at the Swiss bank’s asset management arm, said futures on tulip bubbles were launched in 1636. The tulip bubble did not burst until February 1637. |
| “Bubbles are by definition irrational,” said Donovan. “Predicting when a bubble will burst cannot use rational analysis. Ignoring a bubble is the best course of action.” | “Bubbles are by definition irrational,” said Donovan. “Predicting when a bubble will burst cannot use rational analysis. Ignoring a bubble is the best course of action.” |
| About 16m bitcoins have been mined so far but there will only be 21m in total because it is written into the currency at its source code. Another futures contract on another US exchange is due to launch next week. | About 16m bitcoins have been mined so far but there will only be 21m in total because it is written into the currency at its source code. Another futures contract on another US exchange is due to launch next week. |
| • Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. | • Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. |
| Bitcoin | Bitcoin |
| Cryptocurrencies | Cryptocurrencies |
| Chicago | Chicago |
| Currencies | Currencies |
| E-commerce | E-commerce |
| news | news |
| Share on Facebook | Share on Facebook |
| Share on Twitter | Share on Twitter |
| Share via Email | Share via Email |
| Share on LinkedIn | Share on LinkedIn |
| Share on Pinterest | Share on Pinterest |
| Share on WhatsApp | Share on WhatsApp |
| Share on Messenger | Share on Messenger |
| Reuse this content | Reuse this content |