Am I missing something here? Bitcoin broke the psychological price barrier of $10,000 USD today hovering around that price for most of the day. It seems Bitcoin's price continues to rise despite those who criticize it.
It's anyone's guess why bitcoin seems impervious to the media criticizing it, fund managers who bad mouth it, governments who try to regulate it, and laws passed to control it. Perhaps the naysayers are just ignorant of what bitcoin is and how it works. The protocol is sound and seemingly unstoppable.
Institutional investors and speculators are raising their greedy heads from the trough as Chicago Mercantile Exchange prepares to sell futures of bitcoin, the very notion of which baffles me.
While this could have some influence on the recent price increase it may be for psychological reasons rather than sound economic reasons. Selling futures could shed a more legitimate light on Bitcoin from a traditional investors vantage point, but it remains to be seen if it will really bring more money into the space.
Starting the second week of December 2017 CME customers will be able to sign contracts to sell bitcoins for an agreed upon USD value at a future date.
Once that contract expires, the customer can make up the difference between the current selling price of Bitcoin and the previously established price, either receiving money or having to pay it out. Basically, it's gambling on the price.
But this doesn't actually bring money into the Bitcoin ecosystem and more closely resembles a side bet off the books. Once the contracts expire that could be a different story depending on how well people's bets panned out.
How can this be driving the price of Bitcoin?
Here's the part that makes me wonder if these so-called professional investors really understand what they're doing or even understand bitcoin at all.
Buying futures in Bitcoin simply means that people will be able to speculate on Bitcoin without actually buying any bitcoins, limiting their exposure and the risk of having their bitcoins stolen.
That means that investors buying Bitcoin futures will not be driving the price up because they are not buying Bitcoins.
Bloomberg’s Matt Levine explains the paradox at play perfectly:
I thought the same thing when the Winklevoss twins’ pitched the SEC their bitcoin ETF startup.
Why buy a derivative of Bitcoin when you can own the actual Bitcoin? Am I missing something here? A 6-year old could see this.
Personally, I'll just hold the real deal and watch the show.
