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Today I’m going to cover two quite interesting topics that have to do in one way or another with the number one digital currency Bitcoin. As you may have noticed in the past weeks, Bitcoin has got most of the attention while the other cryptocurrencies have taken a big dip. All are embracing Bitcoin and Bitcoin only, dismissing all other cryptocurrencies. Why it is so could be another interesting topic but will leave it for another time.
Today, we will focus on Wall Street and its plan to occupy the Bitcoin market.
Wall Street: Occupy Bitcoin
Let’s start with a report released by Bank of America Merrill Lynch (BAML) at the end of October about the Bitcoin opportunity. According to BAML, whoever gets in the Bitcoin boat first will stand on big pile of money. $1.6 billion to be exact. What in the world BAML is talking about? Well, the market for a US licensed Bitcoin Exchange-Traded Fund or ETF could be worth 10% of the current $1.6 trillion Fiat currency volumes which is $1.6 billion.
You probably have heard of Bitcoin ETF quite a lot in 2017. Earlier this year, the US financial regulator Securities and Exchange Commission (SEC) rejected a Bitcoin ETF license mainly because of the digital currency’s unregulated nature and now the Chicago Board Options Exchange (Cboe) – the largest US options exchange – is rallying for yet another attempt to license Bitcoin, according to BAML.
Granting that license would mean Bitcoin is considered a liquid financial instrument tradeable on a US stock exchange. So, you can imagine the implications of such a license.
However, this isn’t the reason why Bitcoin reached new all-time highs and continues to do so at the time of this report. The topic that fueled the Bitcoin market has to do with another major Chicago-based exchange and that’s Chicago Mercantile Exchange (CME).
CME Group – the world’s largest financial derivates exchange – announced this week the launch of Bitcoin Futures. Futures are financial derivatives, contracts that will be executed at a future date, based on a future price.
The announcement fired up the market once more even though Bitcoin Futures doesn’t necessarily mean a direct injection of mainstream money into the market. It only means CME is planning to create a secondary market where investors will speculate the price of Bitcoin, winning or losing depending on their price prediction. They won’t buy Bitcoin!
Nevertheless, this could lead to high exposure for the Bitcoin market. Retail investors would understand Bitcoin is for real and could possibly try to reach the Bitcoin market directly and, why not, buy the number one digital currency.
This launch could also mean SEC will reconsider their stance on Bitcoin ETFs and could eventually license such financial instruments.
Already, American hedge funds are taking advantage of this massive opportunity and invest in the cryptocurrency market. As per a report published by CNBC, over 90 hedge funds focusing on cryptocurrencies have launch thus far, in 2017, a flat 300% increase compared to the previous years. All these hedge-funds manage between $2 and $3 billion in assets but ‘aspire to manage $8 billion.’
And the time for regulated SEC-licensed exchanges is just around the corner.
But before starting celebrating and lighting our cigars, let’s take a step back and also look at the potential dangers Bitcoin is facing now with such markets open for business.
A US brokerage firm released an interesting report after the CME Group announcement warning everybody about the risks involved that could lead to yet another financial crisis.
According to Themis Trading and the firm’s principal Joe Saluzzi, “these (Bitcoin Futures) products remind us of the collateralized debt obligations (CDO’s) which were peddled during the financial crisis. Those were instruments that essentially placed a seal of approval around very risky mortgages. A bitcoin future would be placing a seal of approval around a very risky, unregulated instrument that has a history of fraud and manipulation.”
And yes, ladies and gents, there is also a big risk of market manipulation when such secondary derivative financial markets are created because exchanges like CME and Cboe ALWAYS think in terms of profit. Not to mention there have been voices in the crypto world speaking about market manipulation long before CME announcement. In fact, in late October, in one of his blogs on Medium, BitCrypto’ed correctly predicted there will be a huge Bitcoin upswing in the coming days but not because CME announced the launch of Bitcoin Futures. The Tether or notorious USDT is AGAIN behind this major move up. But that’s another story that I will cover for CryptoHQ for sure in the near future.
I will end this topic with a prediction Saluzzi made for Business Insider: “I have a feeling that the SEC may be swayed. Before you know it, there will be many ETFs, and they’ll all be based on underlying exchanges that aren’t legitimate. And pretty soon these things will be buried so far into portfolios and no one will know where they are, until they blow up. And it’ll be because nobody did the due diligence into the underlying exchanges. This is not conspiracy theory. This is fact.”
Bitcoin Gold Updates
Moving on, let’s also briefly discuss about Bitcoin’s latest fork, Bitcoin Gold. Many still wonder if BTG is a reality or not.
If you paid attention to CryptoHQ, you would know the fork happened, according to the Bitcoin Gold development team on October 24, 2017. Nevertheless, their replay protection, ‘an essential feature that protects users’ coins from being spent unintentionally’ was a work in progress at that time.
Not anymore though. On November 1, 2017, the team announced they have fully implemented the replay protection feature that secures the Bitcoin Gold network.
No, your (and mine for that matter) FREE money aren’t ready yet! There are still several steps to be made before publicly launching the new blockchain. And one of the them is obviously to test the reliability of the blockchain. In the team’s latest blog posted today, all are invited to try out the testnet, ‘a temporary blockchain used for testing the network,’ including GPU miners, wallets and even exchanges.
There is no ETA for the BTG airdrop for the time being but be sure to check CryptoHQ daily as I will keep you up to date on the ‘imminent BTG launch,’ as they say in the blog.
Please, bear in mind, before getting all excited, that for a week or so, developers mined BTG privately to create their own ‘pre-mined’ developer-accessible-only BTG fund. So, like in all ICOs out there, a certain amount of BTGs are reserved for ‘the project.’ Draw your own conclusions.
Also, as a reminder the next Bitcoin hard fork – Segwit2x – is scheduled to happen in around 10 days, on November 15, 2017.
Bitcoin Cash announced its own hard fork – this time with no split consequences – scheduled for November 13, 2017.
In the meantime, keep calm and invest cautiously.