In the first edition of CRYPTO TREND, we introduced Crypto Currency (CC) and answered several questions about this new market space. There is a lot of NEWS in this market every day. Here are some highlights that give us an idea of how new and exciting this market space is:
The world’s largest futures exchange to create a bitcoin futures contract
Terry Duffy, president of the Chicago Mercantile Exchange (CME), said: “I think sometime in the second week of December you will see our [bitcoin futures] listing agreement. You can’t mine bitcoins today, so there’s only one way. You either buy it or you sell it to someone else. So you create a two-sided market, I think it’s always much more efficient.”
CME intends to launch bitcoin futures by the end of the year pending regulatory review. If successful, it would give investors a viable way to go “long” or “short” Bitcoin. Some sellers of exchange-traded funds have also filed for bitcoin ETFs that track bitcoin futures.
These developments have the potential to allow people to invest in the cryptocurrency space without owning CC directly or using the services of a CC exchange. Bitcoin futures can make the digital asset more useful by allowing users and intermediaries to hedge their currency risks. This could increase adoption of the cryptocurrency by merchants who want to accept Bitcoin payments but are wary of its volatile value. Institutional investors are also used to trading regulated futures, which are not plagued by money laundering concerns.
CME’s move also suggests that Bitcoin has become too big to ignore, as the exchange seemed to shut out crypto futures in the recent past. Bitcoin is pretty much all anyone is talking about at brokerages and trading firms, which have suffered amid rising but unusually calm markets. If one exchange’s futures take off, it will be nearly impossible for another exchange, such as the CME, to catch up, as scale and liquidity are important in derivatives markets.
“You can’t ignore the fact that this is increasingly becoming a story that’s not going to go away,” Duffy said in an interview with CNBC. There are “core companies” that want access to bitcoin and there is “tremendous pent-up demand” from customers, he said. Duffy also believes that introducing institutional traders to the market could make Bitcoin less volatile.
A Japanese village will use cryptocurrency to raise capital for municipal revitalization
The Japanese village of Nishiawakura is exploring the idea of holding an initial coin offering (ICO) to raise capital to revitalize the municipality. This is a very new approach and they can ask for support from the national government or seek private investment. Several ICOs have had serious problems and many investors are skeptical that any new token will have value, especially if the ICO turns out to be another joke or scam. Bitcoin was certainly no joke.
INITIAL COIN OFFERING – ( ICO )
We didn’t mention ICO in the first edition of Crypto Trend, so let’s mention it now. Unlike an initial public offering (IPO), where a company has an actual product or service to sell and wants you to buy shares in its company, an ICO can be held by anyone who wants to initiate a new blockchain project with the intention of creating a new token on their chain. ICOs are unregulated and several are outright fake. However, a legitimate ICO can raise a lot of money to fund a new blockchain project and network. It’s typical for an ICO to generate a high token price near the beginning and then go back down to reality soon after. Since an ICO is relatively easy to get hold of if you know the technology and have a few dollars, there have been many and today we have about 800 tokens in play. All these tokens have a name, they are all crypto currency and except for the very well known tokens, such as Bitcoin, Ethereum and Litecoin, they are called altcoins. Currently, Crypto Trend does not recommend participating in ICOs as the risks are extremely high.
As we said in issue 1, this market is the “wild west” right now and we advise caution. Some investors and early adopters have made big profits in this market space; however, there are many who have lost much or everything. Governments are considering regulations as they want to know about every transaction in order to tax everyone. They are all heavily in debt and penniless.
So far, the cryptocurrency market has avoided many government and conventional banking financial problems and pitfalls, and Blockchain technology has the potential to solve many more problems.
A great feature of Bitcoin is that the creators have chosen a finite number of coins that can ever be generated – 21 million – thus ensuring that this crypto coin can never be inflated. Governments can print as much money as they want (fiat currency) and inflate their currency to death.
Future articles will look at specific recommendations, but make no mistake, early investing in this sector will only be for your most speculative capital, money you can afford to lose.
CRYPTO TREND will be your guide if and when you are ready to invest in this market space.
Stay on the line!