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PayPal, Visa Face No Dire Threat from Bitcoin, Claims Analyst

An analyst at research firm MoffetNathanson has claimed that Bitcoin is no more than a minor threat to established methods of payment such as Visa and Mastercard.

Lisa Ellis, working for the researchers who cover the media and internet retail sectors, suggested that speed of transaction delivery will remain Bitcoin’s main hurdle to becoming a challenger in the industry. It is a concern of some of the world’s largest retailers.

Ellis, an outspoken critic of Bitcoin, said that so long as Visa and Mastercard were available, she wouldn’t even buy a cup of coffee with Bitcoin. She saw little sense in casting any preference in using cryptocurrencies over more traditional payment methods such as cash, credit or electronic payment. She appears to leave the door open for possibilities, however, acknowledging that the day Bitcoin would be used as a mainstream payment method may lie in the future.

However, one important factor overlooked by the MoffetNathanson analyst is the excessive fees charged by credit card companies, which is driving some companies to reconsider their options. Rumors that the supermarket giant Kruger might be considering Bitcoin as an alternative payment method have been backed up by comments made by Morgan Creek recently. The company’s partner, Anthony Pompliano, recently announced that he had spoken to a Kroger Digital representative regarding adding crypto payments as an alternative to Visa, after Kruger ditched the credit card giant due to excessive fees.

In reality, Bitcoin and other cryptocurrencies’ value have rarely reflected their use in terms of market position. Usage is well documented as being in the ascendancy moving forward, and Bitcoin is now recognized as a store of value by intuitional investors with interest mounting elsewhere in futures contracts after both CME and CBOE exchanges began offering Bitcoin futures in 2018.

 

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Binance: ETFs Not Core to Crypto Growth

ETFs Are Not Core to Crypto Industry’s Growth, Binance CEO Weighs In

A popular trend as the cryptocurrency industry develops is the introduction of the analogous derivative instruments of the traditional financial market, aimed at luring in institutional investors into the crypto world. One such instrument is the exchange-traded fund (ETF).

CEO of leading cryptocurrency exchange Binance, Changpeng Zhao, has, however, downplayed the role of ETFs in the growth of the crypto industry. He said: “If it [a Bitcoin ETF] is listed on a big traditional exchange… that does bring in a lot of attention from people outside our industry.”

In a live stream via Periscope on 6 February, Zhao attempted to draw the attention of crypto enthusiasts to a very important piece in blockchain development – entrepreneurs building real, and usable products.

Blame it on the bear

The bear market which started at the cusp of the last all-time high of Bitcoin hasn’t made it easy for crypto projects. Many startups last year faced developmental challenges and were either forced to abandon their projects or get absorbed by another. Now, lots of players in the industry have become highly dependent on these market derivatives being introduced.

First, it was Bitcoin futures introduced by CME Group and CBOE in late 2017, which helped drive the price of Bitcoin to a new high of USD 20,000. However, it didn’t last long. Suffice to say, it was an opportunistic glitch in the price dynamics of Bitcoin.

Secondly, speculations about another bull-run propelled by ETFs run deep in the crypto community. Perhaps similar trends are bound to occur with more derivatives being introduced into the sphere, however, without an established value-based blockchain ecosystem in place, the market could get dire once more.

ETFs or no ETFs

As of the time of writing, the US securities regulator, Securities Exchange Commission (SEC) has rejected nine ETF applications. Each was laden with similar bull run expectations from the members of the crypto community as many have speculated on the prices increase should the SEC give the green light.

Recently,CBOE, along with investment firm VanEck and financial services company SolidX, reapplied for a rule change to list Bitcoin ETFs after withdrawing it a week earlier.

With the ongoing fuss about Bitcoin ETFs, Zhao seems to think that with or without the ETFs, the industry will grow. A sentiment probably sparsely shared as focus on the real development of blockchain and its applications are fairly the driving motif for latter blockchain adopters.

Other derivatives are coming

Bitcoin News recently reported a new class of derivative instrument being introduced by US-regulated derivative platform LedgerX, which is essentially a binary wager on the next Bitcoin’s block-reward halving.

While derivatives may be an economic milestone for the crypto industry, the overall utility of blockchain applications and their gradual adoption by legacy systems adequately offset the economic benefits of derivate crypto markets.

 

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Permabull Tom Lee Puts Bitcoin Fair Value Near $15k

Permabull Tom Lee Puts Bitcoin Fair Value Near k

Fundstrat Managing Partner and Head of Research Thomas Lee is sticking to his guns despite Bitcoin’s flailing fortunes, saying that its fair market value is no lower than USD 13,000 and as high as USD 14,800.

Thomas Lee predicted that Bitcoin would hit USD 25,000 by the end of 2018, and while that forecast is all but guaranteed to go out the window by some distance, he insists that evidence of the growing number of active wallet addresses, usage per account, and factors influencing supply calculates fair market value at far higher prices.

Without disclosing the exact formula that combines these indicators, Lee attributes Bitcoin’s “meltdown” below fair market value to ICO companies selling off their treasuries, and the overall macroeconomic climate.

Bitcoin News also examined the possible causation driven by the launch of Bitcoin futures on CME. The Bitcoin market began its steep descent from USD 20,000 on 17 December 2017, the same day the futures launched. The Federal Reserve confirms that the launch of Bitcoin futures is a primary cause of the decline in Bitcoin’s price.

Combining Lee’s analysis and the Federal Reserve statements regarding Bitcoin futures, it can be postulated that Bitcoin really is below its fair market value due to the Bitcoin futures, and that price has become decoupled from reality. If this is true, it is similar to what happened to the spot gold markets after futures became a dominant force.

Essentially, once futures markets are introduced to an asset class, the fair market value no longer determines spot value. This theory is perhaps not well-known in the crypto space, leading to numerous price forecast busts in 2018.

Asked to update this forecast, Lee responded, “We are tired of people asking us about target prices.” Perhaps Lee now understands the tried and true weatherman adage that one should not make a forecast unless they have to.

 

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Federal Reserve: CME Bitcoin Futures Prompted Bear Market

Federal Reserve: CME Bitcoin Futures Prompted Bear Market

In a statement widely overlooked by the Bitcoin community, the Federal Reserve published a letter on its website in May 2018 blaming the launch of Bitcoin futures markets on the Chicago Mercantile Exchange (CME) for the decline of Bitcoin’s price.

Indeed, Bitcoin futures launched on CME on 17 December 2017, the same day the biggest Bitcoin rally in history reversed into a fall. On the very first day of Bitcoin futures trading, futures opened at USD 20,650 and closed at USD 19,055.

The Federal Reserve says this sort of market behavior has been observed in other asset classes when futures markets are introduced. Specifically, it mentions how the mortgage industry boom was reversed when futures markets for mortgage securities were launched.

Its reason for this is that when a new asset class is born, there are optimistic investors who buy it up, driving the market upwards. However, pessimistic investors have no voice and no way to bet against an asset’s value, until futures markets are launched. Once futures markets are launched, pessimistic investors can short sell, where they buy futures contracts via a loan, sell them for cash and then buy back the contracts later at a lower price before the contracts expire.

The Federal Reserve implicitly says that Bitcoin would have kept rising past USD 20,000 if CME had not launched Bitcoin futures and explicitly says the CME Bitcoin futures are the exact reason for the beginning of Bitcoin’s price collapse.

Further, the investment opportunity presented by Bitcoin futures diverts investment away from the spot markets. Bitcoin futures on CME are cash settled, meaning no Bitcoins are backing them. Therefore, investment into the futures does not increase spot demand for Bitcoin but in fact, causes Bitcoin’s price to be lower since the money invested into the futures is diverted from the spot market.

The Federal Reserve explains how the combination of short selling and diversion of investment away from the spot markets creates a feedback loop which forces Bitcoin’s price lower.

 

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Nasdaq Full Steam Ahead on Bitcoin Futures, New Target Q1 2019

Bloomberg has reported that Nasdaq Inc has decided to move forward with its plans to list Bitcoin futures and this could happen as soon as the first quarter of 2019.

Nasdaq is following up on its initial plans in November 2017 to launch Bitcoin futures in 2018, doing so in the hopes of sustaining a long-term cryptocurrency patronage. However, it failed to execute its original plans, committing to satisfy the standards imposed by the US financial regulator Commodity Futures Trading Commission (CFTC).

Bitcoin futures were thought to be instrumental to the astronomical rise of the price of Bitcoin last year, with the market registering price verticals as high as USD 20,000. The first two derivative markets to launch the bitcoin futures were CBOE Global Markets Inc and CME Group Inc, after which the CFTC decided to review the processes for listing crypto derivatives.

Nasdaq’s decision comes as a bold move considering the current market conditions, as Bitcoin has dropped from its all-time high and now trades as low as USD 4,000.

The current market conditions seem to have fallen short of the initial expectations that institutional investments attracted by the Bitcoin futures contract would be the sustaining wave for the next cryptocurrency mass adoption. However, this year’s market has only been in the reverse. Still, institutional investments remain a topic of focus as speculation on them make headlines daily.

Moving forward, it does seem as though Nasdaq had been brewing on its plans to ensure that it meets the demand of a wide range of investors and ensure that its contracts services are foolproof, thereby outpacing its competitors. This was disclosed by an unnamed source reported by Bloomberg who said:

“The Nasdaq futures will be based off the Bitcoin’s price on numerous spot exchanges, as compiled by VanEck Associates Corp… CME uses prices from four markets, while it’s just one at Cboe.”

On a general note, Nasdaq has shown a keen interest into blockchain technology as a whole alongside the derivative systems, even considering the possibility of a Nasdaq cryptocurrency exchange in the future.

 

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CME to Stick With Bitcoin Before Spreading the Field

CME, the world’s largest exchange operator, says that it is in no rush to list more cryptocurrencies to Bitcoin futures trading at this time.

CME Group is the world’s leading and most diverse derivatives marketplace, handling 3 billion contracts worth approximately USD 1 quadrillion annually. The financial giant, which is also the owner of the Dow Jones stock and financial indexes, began offering Bitcoin futures back in December of last year, following CBoE Global Markets Inc similar move.

The group’s CEO, Terry Duffy, says that so far he hasn’t seen huge flows of business, but is happy to take a “wait and see approach”. Competitor CBoE has been trading 5,881 contracts a day in 2018 to CME’s average of 3,063 according to Bloomberg, although the daily average works out to double that of CBoE at 15,317.

Duffy said that in his 40 years in trading that adding Bitcoin futures was a massive step, describing it as possibly the most controversial launch of any product by the company to date. Consequently, the company currently has no plans for any other products in the near future, commenting, “This is going to take some time one way or another and we’ll do it the right way.”

Duffy said he doesn’t want derivatives novices to trade the futures contract “because it is highly volatile and new”. Bitcoin futures now is a minute portion of CME’s business compared to their average daily volume total of 18.4 million contracts in the second quarter of 2018.

CBoE itself has expressed that it would consider opening its doors to other cryptocurrencies in the future and has become a keen player. Its president Chris Concannon expressed a view earlier this year that digital currencies were “here to stay” and that the New York-based exchange had the vision to open a “crypto complex”.

Bitcoin futures trading is fast becoming the next big thing on Wall Street as the introduction of derivatives is increasingly taken on board by major players.

 

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Bitcoin Makes a Mid-Year Leap Forward of 12%

Bitcoin has taken a 12% jump today after last week’s lows and is now trading at USD 6,611 at time of writing.

This will be perceived by many to be the long-awaited upward hit that the digital currency has been waiting for after hitting its lowest level since November last week. Last week’s price was attributed by many to lackluster interest from new buyers due to its recent downward trend. Others cited the expiration of CME futures contracts on 20 June 20, according to MSN.

The rise is on the back of a sustained period of bearishness seeing cryptocurrencies dropping 52% from the beginning of 2018. However, as bears seem to ignore with varying predictions of the demise of the digital currency, Bitcoin still remains up by a massive 145% since the middle of last year, rising 1,300% in 2017.

The rise of altcoins has waned under pressure from cryptocurrency markets’ recent difficulty to maintain any stability, seeing between 800 to 1,000 ICO projects go to the wall, depending on whose version one reads, with genuine ICOs flourishing globally in countries which support blockchain enterprises with enthusiasm.

Regulatory processes have had their effect globally, although many states in the US are integrating blockchain into governmental systems with some innovative projects. Fraudulent ICOs have been met with punitive measures by the SEC which has dampened the ICO market and heightened negative public opinion this year with bad press.

But of course, where there is negativity, there is sure to be a polar opposite, with big guns in the industry making some heart-stopping predictions over the past few months. Tom Lee went for Bitcoin at USD 20,000 by the middle of the year then admitting he’d got it wrong but then sticking with a USD 25,000 value for December 2018. Tim Draper made his “bigger than the internet” comment, predicting the digital currency would be at USD 250,000 by 2022.

It remains to see if Bitcoin has stirred and whether it will begin clawing back some of those gains of 2017 as the year progresses, as the bulls predict.

 

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Bitcoin Futures Contracts Expiration Possible Cause of Market Volatility

The head of research at Fundstrat Global Advisors, Thomas Lee, says the expiration dates of future contracts may be a cause of market volatility and may be part of the reason Bitcoin’s price slid this past week.

Chicago Board Options Exchange (CBOE) Bitcoin futures contracts for June expired on 13 June 2018, and that same day Bitcoin dropped as low as USD 6,100 on Bitfinex. Lee says that Bitcoin drops on average 18% in the 10 days leading up to monthly futures contract expirations. So far there have been six future contract expiration dates since Bitcoin futures launched on CBOE in December 2017.

There were a couple of exceptions, in February 2018 Bitcoin price went up 15% as the expiration date approached, and in April 2018 Bitcoin’s price went up 16%. Lee says a more general observation is that there is significant price volatility, up or down, around Bitcoin futures contract expiration dates.

Lee found through his analysis that Bitcoin prices generally recover six days following contract expiration. Indeed, Bitcoin has recovered since the 13 June 2018 futures contract expiration from its low of USD 6,100 to USD 6,600 as of this writing, but has a ways to go before getting back to levels near USD 7,500 ten days before the contract expiration.

The possible logic behind Lee’s findings is that an investor who is holding a long Bitcoin position but shorting the futures may sell large amounts of Bitcoins as the expiration date approaches to minimize tracking error. Then the investor may sell all of their remaining Bitcoin, and if it’s a large enough sell it could cause the market to drop, which would increase the investor’s profits from their short position.

Bitcoin has billions of USD of trading volume per day, so it seems unlikely that investors trying to make profits shorting the futures markets would have enough money to drop global Bitcoin price. In any case, the Commodities Futures Trading Commission is investigating Bitcoin exchanges to see if any price manipulation related to futures trading has been occurring.

President and chief operating officer of CBOE Global Markets, Chris Concannon, says that the fall of Bitcoin’s price can be more easily explained by bad news and that the CBOE futures don’t have as much influence on the global Bitcoin market as Lee is saying.

 

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Moody’s, Fitch, S&P: Bitcoin Futures Considered Risky

The top three credit rating agencies, S&P, Moody’s and Fitch, said they consider Bitcoins future exchanges to be risky business, and that banks which clear Bitcoin futures contracts could have their credit rating downgraded if Bitcoin futures trading volume continues to grow.

The credit rating agencies assign letter grades to banks, corporations, and governments to indicate how likely they are to default on debts. The lower a grade a bank has, the harder and more expensive it is for them to obtain loans, limiting the amount of credit they can extend to clients.

Moody’s says Bitcoin futures contract clearing is considered credit negative since it exposes the bank to the volatile Bitcoin market, whether they are directly handling cryptocurrency or not. Volume is not enough to cause a credit rating decrease at this time, but if volume increases enough that will cause an increase of risk that will force agencies to assign a lower grade.

A Bitcoin futures contract is an agreement to buy or sell Bitcoin at a pre-determined price at a specific time in the future. This can be used by traders to manage their risk, since if the market drops they could sell their Bitcoins at a higher fixed rate that was agreed on in the futures contract regardless of how far the market drops.

This mechanism that can help manage risk can be used to profit from shorting the Bitcoin market too. The Bitcoin market has been in a sharp decline since futures contracts launched, making shorting quite profitable, to the point that a federal investigation has been opened up by the Commodities Futures Trading Commission to determine if futures trading has led to manipulation of the Bitcoin market. The initiation of the federal investigation and this announcement from the credit rating agencies regarding Bitcoin futures might be related.

Bitcoin futures contracts were officially launched in December 2017 and are now traded on the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE).  Trading volume of Bitcoin futures contracts has been increasing, with a record USD 670 million of daily volume on 25 April 2018. Futures are primarily traded by institutional investors, so increasing futures volume is a positive sign that institutional investors are putting more money into Bitcoin.

Bitcoin futures contracts are cleared by Options Clearing Corporation for CBOE and Clearport for CME, so this statement from the credit rating agencies is directed at these institutions, but also applies to any institutions that decide to facilitate clearing of Bitcoin futures contracts in the future.

 

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Wall St “Crypto King” Bullish on New Market Jump Start, Needs Clarity

Bart Smith, the head of digital assets at Susquehanna International Group, once crowned “Wall Streets Crypto King” claims that institutional investors will re-stimulate the cryptocurrency market once more regulatory clarity is provided, according to CCN.

Smith, who launched a crypto desk which buys and sells millions of dollars in bitcoin and other cryptocurrencies, asserts that regulatory clarity will allow institutions to be more active in the crypto space, given their distrust of an uncertain market.

“We have a dedicated team of traders and technologists,” he told CNBC. “We’ve been trading bitcoin primarily, but in 2017 as the marketplace expanded, we expanded the number of coins we were trading and the number of exchanges we were providing liquidity on,” adding “We are trading on average a couple hundred million dollars a day [on bitcoin futures] across CME and CFE combined that’s not retail.”

Smith was asked if there was currently a correlation  between the stock markets and cryptocurrency which he felt wasn’t the case:

“We have not seen much correlation at all between the equity and bitcoin markets… Trading cryptocurrencies is way more analogous to other asset classes than you might think from a market maker’s perspective, managing risk and the operational sides of it. But as far as the investor demand for it, and what drives bitcoin and other cryptocurrencies, we have yet to find much analogy in the driver of it.”

On regulation, he maintained that it was the importance and clarity of regulation itself, rather than whether or not there should be any, suggesting “There has been a tremendous amount of focus on the SEC and Chairman Clayton’s comments. But it’s really a whole host of other regulatory agencies out there because the ecosystem expands beyond the traditional financial assets.”

Smith maintains that the future looks bright for cryptocurrencies as he strongly believes in its longevity, and maintains that digital currencies have the potential to change aspects of financial services which will “exist forever.”

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