Complex Made Simple

Bitcoin at $400,000? Can anything or anyone stop that?

All indications so far are that any runaway Bitcoin price train will trigger all manners of brakes to slow it down.

Bitcoin is on its second day of futures trading on the much more robust CME platform, one week after a relatively slow trading week on the CBOE, and the price pendulum has stabilized.

Yet some early predictors of Bitcoin’s current rise are not the least bit worried about the digital currency reaching a $300,000 to $400,00 ceiling.

We’ll get to that, but how did the Cryptocurency do on the CME?

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True to real form

The CME Bitcoin January futures track the actual price of Bitcoin much more closely than what the CBOE Bitcoin January futures did at the start of last week when the currency had a 19% surge on first day of trading a week ago.

The CBOE future contracts reached at one point a 13% price differential with the real Bitcoin but CME contracts are not proving to be that erratic.

Just over 650 contracts for Bitcoin’s value in January 2018 have now been traded with a contract priced at $19,330, down from the opening price of $20,650 while trading on pure CME adrenaline.

Each CME contract is tied to 5 Bitcoins, unlike the CBOE’s 1bit-to-1bit approach.  The CBOE also settles its futures against a daily price auction from digital asset exchange Gemini, while the CME uses its own Bitcoin reference rate which tracks several cryptocurrency exchanges.

Joe Van Hecke, founder and managing parter at Chicago-based trading firm Grace Hall told CNBC that it appears more institutional-level investors are trading the CME contract.

“There’s more people who are involved in the CME launch than there were at Cboe’s,” Bobby Cho, head trader at major bitcoin trading company Cumberland, told CNBC.

“The spot market still dictates where futures are trading, just because of the sheer volume.”

Read: Bitcoin: A fraud or an ultimate game-changer?

Is Bitcoin a legitimate $400,000 racehorse?

Launching Bitcoin as a futures asset class gave it legitimacy among many previously hesitant investors, who realised that in less than 10 month, more than 170 “cryptofunds” have launched to invest in cryptocurrencies and blockchain start-ups, according to financial research firm Autonomous Nex.

Research analyst Ronnie Moas, the founder of Standpoint Research, told CNBC that Bitcoin will surge past $20,000 and continue its meteoric march into six figures.

“The end-game on bitcoin is that it will hit $300,000 to $400,000 in my opinion, and it will be the most valuable currency in the world,” said Moas.

“I know how much Bitcoin there is (21 million), and in two years’s time there will be 300 million people in the world trying to get their hands on a few million Bitcoin.”

So why are regulatory frameworks so far behind?

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Training ahead of regulations

France will propose that the G20 group of major economies discuss regulation of the bitcoin virtual currency next year, Finance Minister Bruno Le Maire said on Sunday.

“I am going to propose to the next G20 president, Argentina, that at the G20 summit in April we have a discussion all together on the question of bitcoin,” Le Maire told French news channel LCI.

The EU agreed last week to enforce stricter rules to prevent money laundering and terrorism financing on exchange platforms for Bitcoin and other virtual currencies, such as revealing the identity of the traders.

Meanwhile, Bitcoin trading interest has reached the UAE, on personal finance levels, and those looking at investment options for 2018 are seeking guidance on cryptocurrency.

Most in the UAE buy Bitcoin online and manage it through an application, but lack of regulations make this risky.

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In reaction to this, Holborn Assets, who have offices in Dubai and Abu Dhabi, are taking steps to introduce independent seminars for clients and the general audience in Q1 2018.

Riyad Adamou, Chief Commercial Officer at Holborn Assets, said: “Due to the unregulated nature of cryptocurrencies, we are not presently able to offer specific investment advice or facilitate the allocation of funds.”

“The seminars will be aimed at clarifying the cryptocurrency markets and the underlying block chain technology, allowing investors to make a more informed decision before investing.”