In the first edition of CRYPTO TREND, we introduced cryptocurrency (CC) and answered several questions about this new market space. There are many NEWS on this market every day. Here are a few highlights that give us an idea of how new and exciting this market space is:
The world’s largest futures exchange for creating Bitcoin futures contracts
Terry Duffy, president of the Chicago Mercantile Exchange (CME) said, “I think sometime in the second week of December you’ll see ours [bitcoin futures] listing agreement. You can’t short bitcoin today, so there’s only one way. You either buy it or 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 a regulatory review. If successful, it will 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.
This development has the potential to allow people to invest in the cryptocurrency space without owning a CC or using the services of a CC exchange. Bitcoin futures could make digital assets more useful by allowing users and intermediaries to hedge their foreign exchange risks. That 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 free from money laundering concerns.
CME’s move also suggests that bitcoin has become too big to ignore, as the exchange appeared 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 from rising but unusually quiet markets. If stock futures were to rise, it would be almost impossible for any other exchange, like the CME, to catch up, as volume and liquidity are important in derivatives markets.
“You can’t ignore the fact that this is becoming more of a story that won’t go away,” Duffy said in an interview with CNBC. There are “mainstream companies” that want access to bitcoin and there is “huge pent-up demand” from clients, he said. Duffy also believes that bringing 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 for municipal revitalization. This is a very new approach and they can seek national government support 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 their company, an ICO can be held by anyone who wants to start a new Blockchain project with the intention of creating a new token on their chain. ICOs are unregulated and several have been outright shams. However, a legitimate ICO can raise a lot of money to fund a new Blockchain project and network. It is typical for an ICO to generate a high token price near the beginning and then come back down to reality soon after. Since ICOs are relatively easy to hold if you know the technology and have a few dollars, there have been a lot of them, and today we have about 800 tokens in play. All these tokens have a name, they are all cryptocurrency, and apart from the very famous tokens, such as Bitcoin, Ethereum and Litecoin, they are called alt-coins. At this time, Crypto Trend does not recommend participating in ICOs, as the risks are extremely high.
As we said in #1, this market is the “wild west” right now and we recommend 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 because they want to know about every transaction in order to tax them all. They all have huge debts and don’t have enough money.
Until now, the cryptocurrency market has avoided many governmental and conventional financial problems and pitfalls, and Blockchain technology has the potential to solve many more problems.
A great feature of Bitcoin is that the originators chose 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 (fiat currency) as they want and inflate their currency to death.
Future articles will deal with specific recommendations, however, 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.