In a landmark for cryptocurrency, bitcoin has, presumably, made its Wall Street debut at 2300 GMT on Sunday, creating consternations in some quarters and excitement in others. By the time you read this, the highly volatile digital currency based on the block chain technology would have opened trading on the Cboe Futures Exchange in Chicago. This feat is to be followed up with a rival listing on the Chicago Mercantile Exchange a week later. The two exchanges have got the green light from the US Commodities and Futures Trading Commission on December 1, though the regulator has hedged its decision with a warning “of the potentially high level of volatility and risk in trading these contracts.”
Bitcoin’s Wall Street entry will set the stage for various cryptocurrencies listing in major stock exchanges across the world eventually, though opinion is still visibly divided on the risk posed by this digital money. Bitcoin is already traded on Luxembourg-based Bitstamp Exchange and on Gemini Exchange in Canada and the UK.
As the bitcoin frenzy is slowly making its way into India, with the IT campuses and high networth circles now buzzing about its easy money prospects, the Reserve Bank of India has once again warned the public about the potential economic, financial, operational, legal and security related risks associated with cryptocurrencies. Many experts have also cautioned investors against the risk involved cryptocurrencies. Hedge fund guru and former Goldman Sachs and Fortress man Mike Novogratz has called it a “lot of froth”. “This is going to be the biggest bubble of our lifetimes”, he said in conference last month. Still more than 100 hedge funds have popped up across the world to bet on this coin, and Novogratz’s himself is launching a $500-million Galaxy Digital Assets Fund, underlining the growing acceptance of cryptocurrencies. Critics have also warned that coin prices could tumble once the new trading venues open the door to short sellers — who bet on downward moves in assets.
However, among those cheering the bitcoin’s Wall Street entry are the Winklevoss twins, who have been called the first bitcoin billionaires. Cameron Winklevoss, thought to be one of the largest holders of bitcoin, thinks the cryptocurrency’s blazing gains this year are just the start. He predicts it will rise as much as 20-fold, as investors come to view it as an upgrade to gold. He believes that investors are beginning to embrace the idea that bitcoin, “mined” by computers performing complex calculations, is more portable and divisible than the precious metal.
As the well-heeled around the world started buying up the coins, bitcoin has surged in value, briefly surpassing $16,000 last week. Bitcoin has made sharp moves in both directions in recent days, falling by almost a fifth on Friday after surging more than 40 per cent in the previous 48 hours. This shows the extent of volatility in its value and the huge risks it carry for investors.
When bitcoin broke into public consciousness in 2013, none would have expected the frenzy. Blockchain — the technology used for verifying and recording transactions that’s at the heart of bitcoin — is seen as having the potential to reshape the global financial system and possibly other industries. As both bitcoin and its blockchain are gaining both imitators and adherents, there’s no doubt that the crytpocurrency is slowly moving into the realm of mainstream finance.