Articles tagged by bitcoin
Is Colin Lambert’s apparent technological illiteracy merely an act to mask his true identity as the genius behind bitcoin? Galen Stops reports.
In the latest twist to an ongoing saga, market sources are now suggesting that Profit & Loss managing editor, Colin Lambert, is in fact, Satoshi Nakamoto, the elusive creator of the digital currency, bitcoin.
Nakamoto released the first version of the bitcoin software client in 2009, before fading from view and eventually disappearing with the enigmatic message that he or she had “moved onto other things”.
As more financial services firms look for ways to utilise blockchain technology within their infrastructures, Galen Stops examines whether the technology is really as safe as advocates claim, following two high-profile hacks earlier this year.
“Cyber and system security is one of the most important issues facing markets today in terms of integrity and financial stability,” said Commissioner Christopher Giancarlo of the Commodity Futures Trading Commission (CFTC) on September 8, when approving system safeguard requirements for derivatives clearing organisations.
Giancarlo is hardly alone in his concerns.
The Wall Street Blockchain Alliance (WSBA) has announced a new working group that will focus on native assets riding upon public blockchains, such as Bitcoin, Ethereum and Zcash.
The new Blockchain Assets Working Group will be chaired by Chris Burniske, blockchain products lead at ARK Investment Management (Ark), and will explore a number of facets of this emerging asset class, including underlying technologies, development teams, economics and market behaviour.
Explaining the focus of the new group, Burniske says: "Instead of focusing on how blockchain technology can be employed within existing financial architectures, this working group will return to the genesis of the blockchain movement that saw the need for native assets to keep decentralised and open systems in economic balance.
Galen Stops looks at why demand for cryptoassets has skyrocketed in 2017 and assesses whether they have any future in mainstream financial markets.
The first working implementation of a blockchain that the world had ever seen was in the Bitcoin software released in 2009. Bitcoin the cryptocurrency then rose to prominence in 2013 when, driven in part by a flurry of media attention, its value rose past $1,000 for the first time.
Following that, 2014 represented a long and painful year of price decline for Bitcoin as an asset, but it continued to garner a lot of attention, not always for good reasons. Then in 2015 the narrative began to change as people really started talking about the potential applications of blockchain technology distinct from any digital assets.
It seemed, not for the first time, like the cryptocurrency bubble had burst yesterday, when the price of Bitcoin tumbled 22% and Ether – Ethereum's native cryptocurrency – similarly dropped 23%.
As Profit & Loss previously reported, these cryptocurrencies – the largest two available by market capitalisation – have been trending up rapidly in 2017, reaching record highs at the start of June.
Yet Bitcoin went from a valuation high of $2,823 on Wednesday to a low of $2,189 on Thursday, according to data from Coindesk. Likewise, the data showed that the price of Ether dropped from $395 to $303 over the same period of time.
The US Commodity Futures Trading Commission (CFTC) has issued an order granting LedgerX, an institutional trading and clearing platform for digital currencies, registration as a derivatives clearing organisation under the Commodity Exchange Act (CEA).
LedgerX will be the first US federally regulated exchange and clearing house for derivatives contracts settling in digital currencies.
Under the order, LedgerX will be authorised to provide clearing services for fully collateralised digital currency swaps. LedgerX, which was also granted an order of registration as a Swap Execution Facility (SEF) on July 6, 2017, initially plans to clear bitcoin options.
The bitcoin blockchain has officially forked, meaning that a subset of bitcoin miners have started to operate a different software to create a new blockchain, but one that shares a transaction history with bitcoin.
This means that where once there was just bitcoin, a single, decentralised digital currency, now there will also be “bitcoin cash”, which shares the same historical blockchain as the original bitcoin but will now diverge from it.
This fork in the original bitcoin blockchain to create this new version of the digital currency is the result of a long-running dispute about how the blockchain should operate, which Profit & Loss has previously covered.
CBOE Holdings has agreed a deal with Gemini Trust Company, which will see the exchange group receive an exclusive global license to use Gemini's bitcoin market data for bitcoin derivatives and indices.
Gemini is a digital asset exchange and custodian that allows customers to buy, sell and store digital assets such as bitcoin and ether. Gemini is a New York trust company that is subject to fiduciary obligations, capital reserve requirements and banking compliance standards of the New York State Department of Financial Services (DFS).
Profit & Loss talks to John Deters, chief strategy officer and head of multi-asset solutions at CBOE, about the potential for cryptocurrencies such as bitcoin to trade on regulated exchange platforms.
Profit & Loss: You recently announced a deal with Gemini to use its bitcoin market data to develop your own bitcoin derivatives and indices. What was the thinking behind this deal?
John Deters: We’ve been observing the evolution of the cryptocurrency space, and of bitcoin specifically, for some time. In parallel with that, we’ve been thinking about what sort of structures might work well for these products.
Digital currency exchange, Coinbase, has raised $100 million in Series D funding.
The round was led by IVP, with participation from Spark Capital, Greylock Partners, Battery Ventures, Section 32 and Draper Associates. Founded in 1980, IVP has invested in more than 300 companies, 106 of which have gone public. Notable IVP investments include companies such as Dropbox, Netflix, Twitter, Slack and Snap.
“Coinbase experienced unprecedented growth over the last year, and we have now exchanged over $25 billion of digital currency for our customers. We’ll be using this new funding to continue scaling even further,” says Brian Armstrong, co-founder and CEO of Coinbase, in a blog announcing the news.
As P&L’s resident cryptocurrency enthusiast I'm excited by some of the developments that have occurred in this space over the past few months, because it could signal the start of these digital assets moving towards the financial mainstream.
To help explain why I think this is such an interesting time in the cryptocurrency space, I explain how I first became interested in them after joining Profit & Loss, that I refused to buy bitcoin when it was at $1,000 because "it will never go higher than this" (it's now at $4,300) and why recent regulatory developments could have significant implications for financial services firms looking at trading cryptocurrencies.
Abu Dhabi-based ADS Securities announces the introduction of bitcoin CFD trading for Middle East and North Africa (MENA) clients using its MT4 platform.
Speaking about the decision to introduce cryptocurrency at this time, Jason Hughes, global head of retail sales, says: “We will be the first brokerage in the MENA region to offer bitcoin trading. We have followed the growth of this very exciting and dynamic new trading asset, but before offering a service we wanted to really understand the market and make sure we have the right systems and protection in place for our clients.
“As with all trading, it is very important to have the financial strength and the IT processes to protect positions. ADS Securities is the right partner for clients looking to trade cryptocurrencies. They understand that our capital reserves, regulation through the UAE Central Bank and the quality of the team provides a different level of support to them,” he adds.
Today we tip-toe into delicate (and to me largely unknown) territory. It remains to be seen whether or not Bitcoin will be a true phenomenon that changes the world – my instinct is still that it will inevitably be reigned in by “The Man” and become as regulated as fiat currencies – but whether or not it does revolutionise the global economy and indeed financial markets, I have a couple of concerns about how it is being treated by some brokers.
At the very start of June, Profit & Loss published an article looking at why demand for cryptocurrencies had spiked in 2017, with the price of bitcoin rising over 200% between January and the latter end of May.
Subsequent to that, demand continued to grow, with the price of bitcoin reaching $4,950 by the start of September. Meanwhile ether – the native cryptocurrency of the Ethereum network – went from $8.29 at the start of the year to $388 by September.
Geopolitics represents the single biggest threat to financial markets, warned Ben Bernanke, former chairman of the US Federal Reserve, at an event in Toronto yesterday.
Speaking at the Swell event hosted by Ripple, Bernanke noted that the financial crisis of 2007-2008 was so severe because different elements of the financial system has become so interlinked that stressful conditions in one area soon spread to other parts of the system. However, he argued that the financial markets are systemically safer now and that the biggest threats to these markets come from external sources.
Despite a growing desire from some mainstream regulated financial services firms to trade bitcoin and other cryptocurrencies that are based off a public blockchain, there doesn’t seem to be many solutions on the horizon for the Know Your Customer (KYC) challenges this presents.
At the Sibos conference being held in Toronto this week, Elisabeth Rochman, financial services chief technologist at Hewlett Packard Enterprise, noted that a lot of the “BigTech” firms – such as Google and Facebook – are behind the curve compared to banks when it comes to looking at use cases for blockchain.
The schism between the blockchain providers and cryptocurrency users that want to in some way overturn the current financial system and those that want to work within it, was highlighted by comments made at the Swell conference hosted by Ripple this week in Toronto.
On the opening day of the event, former US Federal Reserve chair, Ben Bernanke, made some fairly bearish comments regarding the future of bitcoin. He essentially said that the need for authorities to prevent criminal transactions occurring represents an existential threat to this particular cryptocurrency.
You can read the full Profit & Loss coverage of Bernanke’s speech here, but the key takeaway regarding bitcoin was that he believes it is “working against, rather than with, the regulators”.
CME Group plans to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods.
The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR), which serves as a once-a-day reference rate of the US dollar price of bitcoin.
Bitcoin futures will be listed on and subject to the rules of CME.
"Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract," says Terry Duffy, CME group chairman and CEO. "As the world's largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities."
My virtual mailbag tells me I shouldn’t but I will digress from the current hot topics of the aftermath of the Mark Johnson trial and the impending guidance on last look today by talking about CME’s launch of Bitcoin futures. Before I do, however, I feel I ought to repeat one observation from a piece I wrote earlier this week – isn’t it strange that the majority of people against changing the language on last look in Principle 17 provided their feedback anonymously?
I will leave that for you to ponder, because I want to look at the potential impact of CME’s launch of Bitcoin futures.
Profit & Loss talks to Tim McCourt, managing director and global head of equity products at CME, about why the Chicago exchange is planning to launch bitcoin futures before the end of the year.
Profit & Loss: So why has the CME decided to launch bitcoin futures?
Tim McCourt: We’re launching this futures contract off the back of customer demand. But a key thing for us is that this product isn’t necessarily something that’s new to the CME. We launched the Bitcoin Reference Rate a year ago, and so it makes very good sense – given the feedback and response that we’ve had from customers – that now is the right time to introduce a cash settled futures contract based on this index that tracks the bitcoin reference rate.
The value of bitcoin (BTC) soared to over $10,000 today, a 900% increase in value from the start of the year.
Despite significant price dips in July, September and November, bitcoin has been on a consistent and stark upward trend since January, when it was valued at $1,000 per bitcoin.
“Bitcoin has sailed past a number of surprising milestones this year, with the $10,000-mark achieved today the most significant so far. With its rising valuation built on the bitcoin buzz more than real worth, it’s likely that we won’t see bitcoin decline in value until it’s more widely accepted,” says Dennis de Jong, managing director at UFX.com.
Nasdaq is planning to launch bitcoin futures next year.
This news comes as the value of bitcoin has been skyrocketing, reaching $10,000 per bitcoin yesterday, but rising to over $11,000 today, before falling back to under $10,000. At the start of 2017, bitcoin was valued at around $1,000.
It also comes after announcements from other major exchanges – CBOE and CME Group – that they are planning to list bitcoin futures before the end of this year.
Profit & Loss understands that one way in which Nasdaq plans to differentiate its bitcoin futures contract is by basing the product on an index that uses pricing sources from more than 50 exchanges worldwide.
Two exchange groups, CME Group and CBoE, have self-certified new contracts for Bitcoin futures products ahead of a full trading launch.
CME Group has self-certified the initial listing of its bitcoin futures contract to launch Monday, December 18, 2017, while CBoE says its own launch date will be announced "shortly".
The announcements were noted in a release by the US Commodity Futures Trading Commission (CFTC), which says its staff have held "rigorous" discussions with CME over the course of six weeks, and CBoE over the course of four months.
Gain Capital has joined the growing ranks of retail FX brokers offering Bitcoin trading, with the launch of the functionality on its City Index platform, the company's FCA regulated service in the UK.
Customers are able to trade the cryptocurrency as either a spread bet or a CFD (contract for difference) – Gain says that it has established liquidity relationships with multiple Bitcoin exchanges, which it uses to create a volume-weighted average price that it claims is “reliable and transparent”.
As the cryptocurrency, bitcoin, takes arguably the next big step towards mainstream adoption, Galen Stops takes a look at the different approaches being taken by regulated exchanges towards designing bitcoin contracts and regulators to overseeing them.
Last week, on December 1, three exchanges regulated by the Commodity Futures Trading Commission (CFTC) self-certified new cash-settled derivatives contracts based on bitcoin.
The exchanges – or designated contract markets (DCMs) – are the CME, the CBOE Futures Exchange (CFE) and the Cantor Exchange.