BLOG | December 12, 2017

Bitcoin Futures Surge in CBOE Debut

Bitcoin is continuing its phenomenal upward march, trading at $16,7300 as of this writing (mid-day Monday, December 11th Bitcoin prices got a boost over the weekend, rising 20 percent on Sunday as bitcoin futures got their debut on the Chicago Board of Exchange Futures Exchange.

The product is apparently popular: Visitors swamped the CBOE website, causing the site to be unavailable at times. Bitcoin futures rose 22 percent over the first day of trading, indicating that financial markets expect prices to rise further, though not at the crazy rates of appreciation we’ve seen so far. The one-month contract opened trading at $15,460 and rose to $18,700 before falling back. As of this writing (11:35 AM ET), XBT is trading at $18,200, up 17.2 percent for the day.

The price is right: Bitcoin futures trades are free through the month of December. Bitcoin will be trading under the symbol XBT.

Bitcoin prices may get another boost thanks to increasing liquidity, as bitcoin futures are expected to begin trading on CME Group’s trading platforms later this month.

Traders should be cautious, though: The XBT contract is based on the price of Bitcoin on the Gemini exchange, rather than on any kind of basket or average. This makes it easier for a big trader to manipulate the futures market by dinking the price on the Gemini exchange at the last minute. In reality, bitcoin prices can vary significantly from exchange to exchange. We don’t yet have an instant arbitrage market working to iron out the gaps.

Bitcoin has gained 1,550 percent this year, and counting. Traders have bid the price of bitcoin up 50 percent over past week despite reports of a major hack: NiceHash, a prominent Slovenia-based bitcoin miner, reported that hackers managed to steal its digital wallet, worth 4,700 bitcoin. That’s a $76.7 million theft at current prices.

Bitcoin Penetrates the Illegal Drug Industry

While bitcoin is not currently routinely accepted at most supermarkets and shopping malls, there is one industry that appears to be wholeheartedly embracing the currency: The illegal drug trade. A report from the U.K.’s Daily Mail indicates that ‘teenagers reeking of drugs’ are now stuffing bitcoin cash machines with 50 pound and higher notes.
Drug dealers are using bitcoin ATMs to launder drug money and avoid the scrutiny of the British banking system by routing large-denomination bills through bitcoin cash machines. The machines accept the cash and the users receive bitcoin in return. The bitcoin, meanwhile, can be transferred overseas in an instant, beyond the ability of UK courts and law enforcement to seize or intercept the transfer.

Meanwhile, merchants installing these bitcoin machines are receiving a monthly fee of up to 1,200 per machine to rent space in their stores, plus a commission for each transaction. These bitcoin ATMs are proving popular in vaping shops, convenience stores, headshops and casinos.

According to the Daily Mail, a majority of those using these ATMs to convert cash into bitcoin are drug dealers, say merchants.

Bitcoin is Big

Bitcoin’s rising market cap is making the phenomenon impossible to ignore, even for bitcoin skeptics. Total market capitalization for bitcoin is now bigger than the annual gross domestic products of entire nations. As of this writing, the market capitalization of bitcoin now stands at $277 billion. Ethereum, the second biggest cryptocurrency by market cap, is a distant second, at $43.8 billion – a slight loss for the week.

Today’s bitcoin market cap roughly matches the annual gross domestic product of Singapore and Venezuela

Etherium, for its part, weighs in snugly between Slovenia and Macao.

What if it Collapses

To paraphrase Ivan Drago in Rocky VI, if it dies, it dies. While some aggressive speculators would certainly get hurt, even a total and sudden collapse of bitcoin prices would barely make a dent in the global economy. The bitcoin market cap is tiny compared to the amounts at stake in the mortgage bubble, which was by its nature highly leveraged.

However, much of bitcoin’s market cap is concentrated in the hands of a few big miners: About 1,000 people own about 40 percent of bitcoin in existence. So a relatively few biggies could devastate small speculators who put a large portion of their own net worth in bitcoin.

Use caution, and don’t gamble more than you can afford to lose.

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Bitcoin Futures Surge in CBOE Debut
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Bitcoin Futures Surge in CBOE Debut
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Bitcoin is continuing its phenomenal upward march, trading at $16,7300 as of this writing (mid-day Monday, December 11th Bitcoin prices got a boost over the weekend, rising 20 percent on Sunday as bitcoin futures got their debut on the Chicago Board of Exchange Futures Exchange.
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