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Week 12 Recap
Copy pasta time: New high for bitcoin: ~$7,600 USD ($9,700 CAD) as of a few hours ago (has since dropped a bit). Recap this week:
The Chicago Mercantile Exchange (CME), the largest derivatives exchange in the world, has announced that it will launch a futures contract for bitcoin before the end of the year. This is quite a significant development, but my gut tells me that this isn't a net positive for the community. By offering this instrument, the CME confers an incredible amount of credibility on Bitcoin, and provides a significant amount of exposure to institutional investors. The primary drawback of these futures contracts are that they're USD cash settled, meaning that no one needs to actually buy or sell Bitcoin at all (i.e. there is no delivery required).
To put it simply, the CME is allowing participants to bet on the price of Bitcoin and exchange USD to pay each other rather than actually handing over BTC when the futures contract settles. While it's true that some institutions may buy BTC to hedge against these futures contracts, most will not. This creates a disconnected secondary market with the potential to be much larger than Bitcoin's market cap, with the end result being that the futures market decides the price of Bitcoin, not the Bitcoin exchanges or owners of Bitcoin.
In a traditional futures market such as oil, retail investors can trade cash settled futures without having to store or accept delivery of the oil they are speculating on. Underlying this system are futures that don't settle via cash; actual producers and middlemen who DO accept, store, and deliver oil based on futures contracts. This foundation (usually) mitigates profligate speculation by institutional investors. The problem with Bitcoin is that it's not a physical commodity; there is no underlying system to keep speculation from running amok. Hopefully this isn't how Bitcoin ends, but I do worry about the impact.
Week 12 Results
It's actually a down week, despite Bitcoins crazy gains. Definitely frustrating to see alts get crushed due to Bitcoins huge gains. Winner this week: EOS with a gain of +3.61 USD (+72.75%). Biggest loser this week: DigitalNote with a loss of $4.84 USD (-36.39%). I said last week that DigitalNote's huge gain was compltely inexplicable, and that it was likely a pump and dump...seems like I was right.
|Symbol||Quantity||Price||October 29th||November 5th||Week Change $||Week Change %|
Want to follow along?
If you're Canadian and want to try the same thing, I use QuadrigaCX (wire transfer, interac online) and Coinbase (VISA, Mastercard, AMEX) to purchase bitcoin, ethereum, or litecoin to transfer to an exchange that supports all these alternative currencies. I used HitBTC to buy all 31 currencies, but many exchanges will work just as well.