Bitcoin, bitcoin, bitcoin – it’s everywhere, even the Big Bang Theory (one of TV’s most popular sitcom) had an episode dedicated to it. I’m being completely serious, check it out here. Does this mean that the market perplexing cryptocurrency has a solid place in the mainstream like its government issued counter-parts?
I couldn’t tell you honesty since I’m not a sociologist, what I do know for sure is that bitcoin has reached the astronomical price of $15,000+ today (price indicative at the time of writing). There are a few factors fueling the effect – most recently the announcement that Cboe Global Markets Inc will begin offering bitcoin futures as early as December 10th and CME Group Inc. launching bitcoin futures on the 18th. They aren’t the only one’s promising bitcoin derivatives though. Nasdaq Inc., Cantor Exchange and startup LedgerX have all announced plans to launch bitcoin futures and derivatives.
Last week CME announced the US regulator approved their request to offer bitcoin futures, which likely created the initial inertia for this new price record to be broken. Speculative (also known as derivative) markets have been shown to move the price of their underlying assets. This means that if the futures BTC markets “short” bitcoin (meaning they believe the price of it will drop) this could cause a drop in the actual asset, in this case bitcoin.
The U.S.’s government regulator CFTC though promised that they would not allow manipulation of bitcoin futures – which brings us to our next potential hang-up.
The ideology behind bitcoin, was to create a currency that is not-government issued and decentralized – in essence being more democratic because of its inability to controlled by policy or governments. In the past this has become a point of contention amongst the community of miners (bitcoin miners use powerful but stripped down computers to process bitcoin transitions, known as blocks) and in fact caused one of the first BTC “hard forks” resulting in bitcoin and bitcoin gold. The argument behind the split was that at that time certain large mining operations made it impossible for individuals to mine bitcoin. This also left the cryptocurrency exposed to the restriction of supply and thus the manipulation of its price. Although no large-scale mining operation has ever attempted to do so, the community feared it was becoming a possibility.
This is another scenario, if the community feels that there is a threat of regulation or manipulation of the price will it react by proposing and enacting another hard fork?
Although a threat of the last hard fork Segwit2x (that was ultimately cancelled) didn’t affect markets as much as the previous forks did. This is probably largely due to more people understanding what a fork is and what happens when its implemented – where previously that knowledge wasn’t as readily available since the cryptocurrency was younger, but things are very different today. I believe the biggest indication of bitcoin’s maturity is the fact that exchanges such as Cboe and CME are starting to offer futures. This adds of course to the validity of this cryptocurrency that some market experts previously called invalid.