Daily Times

LONDON: Bitcoin rocketed above $15,000 for the first time on Thursday, after adding more than $2,000 to its price in fewer than 12 hours.

Bitcoin, the world’s biggest and best-known cryptocurrency, has seen a more than fifteenfold surge in its value since the start of the year.

It climbed to as high as $15,344 on the Luxembourg-based Bitstamp exchange around 1420 GMT, leaving it up more than 12 percent on the day, having traded just above $13,000 12 hours earlier.

Many market-watchers said the launch this weekend of bitcoin futures by CBOE, one of the world’s biggest derivatives exchanges, was helping drive up the price on expectations it would draw more investors to the market.

“Futures trading will mean more demand…and is a form of ratification of the underlying tech – bitcoin and cryptocurrencies in general. They are now on the main stage,” said Charles Hayter, founder of cryptocurrency data analysis firm Cryptocompare.

But some are warning that the launch of bitcoin futures, which will allow investors to take speculative “short” positions on the cryptocurrency, as well as “long” positions, could cause even greater volatility.

“Aggressive traders, such as hedge funds and algorithm-driven funds, (will be able) to use this futures market to enter bitcoin trading with high levels of liquidity for aggressive short-selling and knock the prices really low,” said Think Markets analyst Naeem Aslam.

“Players now have an incentive to be on the short side and make profits hedging against the upside.”

The latest surge brought bitcoin’s “market cap” – its price multiplied by the total number of bitcoins in circulation – to more than $260 billion, according to Coinmarketcap, a trade website. That, in theory, makes its market value higher than that of Visa.

The value of all cryptocurrencies now stands at around $415 billion, according to Coinmarketcap.

Bitcoin has more than tripled in price since the start of October, putting it on track for its best quarter since the end of 2013, when it surged above $1,000 for the first time.

It slumped in 2014, after Mt Gox, then the world’s biggest bitcoin exchange, collapsed, saying it had been hacked and had 650,000 bitcoins stolen.

Meanwhile, Bitcoin fans are salivating over the potential of long-awaited legitimacy for the cyptocurrency when futures trading launches this weekend, but experts worry the risks associated with bitcoin’s Wild West-like nature could overshadow the debut.

The first bitcoin future trades kick off Sunday at 6pm on Cboe Global Markets Inc’s Cboe Futures Exchange, followed a week later by CME Group Inc’s CME.

Nasdaq Inc plans to get into the mix next year, Reuters reported. While Cboe, CME and Nasdaq offer strictly policed trading environments, the underlying bitcoin market is riddled with crypto-exchanges lacking even basic oversight.

That has stoked fears of market manipulation, inaccurate pricing, and systemic risk to clearing houses. “I’m kind of taken aback by what’s happened in the last three months,” said Richard Johnson, an analyst at Greenwich Associates who owns digital currencies and considers himself a bitcoin bull. “I’m concerned things are moving a bit too quickly.”

Bitcoin’s more than 10-fold upsurge this year has led to warnings of a bubble by the likes of JPMorgan Chase & Co Chief Executive Officer Jamie Dimon, who called it “a fraud” that will eventually blow up. Others, like Wall Street adviser Tom Lee, expect bitcoin to top $100,000.

On Wednesday, its hypervolatility was on full display as it broke through $13,000 for the first time on the Luxembourg-based Bitstamp exchange, jumping more than 11 percent on the day.. Since August 2011, bitcoin has averaged a daily price change of nearly 3 percent, up or down, compared with a daily average change in the US dollar-euro cross rate of less than 0.5 percent since the euro’s debut in 1999.

“Maybe it’s just the most unique market that is going to continue to go up forever and ever and so everybody on the long side is going to make money and it’s a great thing, but I’ve been around long enough to know that’s not going to work out so well,” said John Lothian, CEO of advisory firm John J Lothian and Company.

As a virtual currency, bitcoin can be used to move money around the world without the need for a central authority, such as a bank or government, which is a double-edged sword, said Steve Grob, director of group strategy at Fidessa.

Published in Daily Times, December 8^th 2017.