In the first edition of CRYPTO TREND we introduced Crypto Currency (CC) and answered various questions about this new market space. There is a lot of news in this market every day. Here are some highlights that give us a glimpse of how new and exciting this market space is:
The world’s largest futures exchange to create a futures contract for Bitcoin
Chicago Mercantile Exchange (CME) President Terry Duffy said, “I think in the second week of December you’ll see us [bitcoin futures] Deal out for listing. Today you can’t short bitcoin, so that’s the only way it can go. You either buy it or sell it to someone else. So you create a two-way market, I think that’s always much more effective.”
CME intends to launch bitcoin futures by the end of the year pending regulatory review. If successful, this would give investors an effective way to go “long” or “short” Bitcoin. Some sellers of exchange-traded funds have also filed for bitcoin ETFs that track bitcoin futures.
These developments have the potential to allow investing in the cryptocurrency space without fully 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 risk. This 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 regulated futures trades, which are not plagued by money laundering concerns.
CME’s move also suggests that Bitcoin has become too big to ignore, as the exchange has appeared to discount crypto futures in the recent past. Bitcoin is the talk of the town at brokerages and trading firms, which have suffered amid a booming but unusually calm market. If one exchange’s futures take off, it will be nearly impossible for another exchange like CME to catch up, since scale and liquidity are important in derivatives markets.
“You can’t ignore the fact that this is becoming a story that won’t go away,” Duffy said in an interview with CNBC. There are “mainstream companies” that want access to bitcoin and “huge pent-up demand” from clients, he said. Duffy also thinks bringing institutional traders into the market could make Bitcoin less volatile.
Japanese village to use cryptocurrency to raise capital for municipal revitalization
The Japanese village of Nishiwakura is researching the idea of holding an initial coin offering (ICO) to raise capital for the revitalization of the municipality. This is a very innovative 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 definitely 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 for sale and you want 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 complete shams. A legitimate ICO can, however, raise a lot of cash to fund a new blockchain project and network. It’s common for an ICO to generate a high token value near the beginning and then soon drop back to reality. Because holding an ICO is relatively easy if you know the technology and have some money, there have been many and today we have about 800 tokens. All these tokens have a name, they are all crypto-currencies, and except for the very well-known tokens like Bitcoin, Ethereum and Litecoin, they are called alt-coins. CryptoTrend does not recommend participating in ICOs at this time, as the risks are extremely high.
As we said in Issue 1, this market is now the “Wild West” and we advise caution. Some investors and early adopters have made huge 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 so that they can all be taxed All of them have huge debts and are strapped for cash.
So far, the cryptocurrency market has avoided many government and conventional bank financial problems and pitfalls, and blockchain technology has the potential to solve many more problems.
One of the great features of Bitcoin is that the founders chose a limited number of coins that could ever be created – 21 million – thus ensuring that this crypto currency will never be inflated. Governments can print as much money (fiat currency) as they can and inflate their currency to death.
Future articles will discuss specific recommendations, however, make no mistake, the initial investment in this sector is only for your most speculative capital, money that you can lose.
Crypto trends will be your guide when you are ready to invest in this market space.