The Intersection: Crypto and Wall Street This Week
As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly: 1. BITCOIN HITS $11,000 BEFORE SLUMP: Bitcoin rose past $11,000 on Wednesday, gaining over $1,000 in less than 12 hours and hitting a record high for the cryptocurrency. However, the rapid increase raised concerns about a growing bubble and the digital currency fell quickly back below the $10,000 level it had just passed to recover near $9,500 during the day. 2. CFTC TO ALLOW BITCOIN PRODUCTS: On Friday, the U.S. Commodity Futures Trading Commission noted that the CME Group (CME) and the CBOE Futures Exchange (CBOE) self-certified new contracts for bitcoin futures products, and the Cantor Exchange self-certified a new contract for bitcoin binary options. CFTC chairman J. Christopher Giancarlo said, "Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past. As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets...Nevertheless, investors should be aware of the potentially high level of volatility and risk in trading these contracts." Once the contracts are launched, commission staff will engage in a variety of risk-monitoring activities and will continue to assess whether further changes are required to the contract design and settlement processes. 3. CME PLANS DEC. 18 LAUNCH: Concurrent with the CFTC announcement, CME Group announced that it has self-certified the initial listing of its Bitcoin futures contract to launch Monday, December 18, 2017. "We are pleased to bring Bitcoin futures to market after working closely with the CFTC and market participants to design a regulated offering that will provide investors with transparency, price discovery, and risk transfer capabilities," said chief executive officer Terry Duffy. "Though we have worked through a lengthy, comprehensive process with the CFTC to get to this point, we recognize bitcoin is a new, uncharted market that will continue to evolve, requiring continued collaboration with the commission and our clients going forward. At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35%, position and intraday price limits, and a number of other risk and credit controls that CME Group offers on all of its products." CME Group's Bitcoin futures will be cash-settled, based on the CME CF Bitcoin Reference Rate which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. 4. NASDAQ TO LAUNCH FUTURES: Nasdaq (NDAQ) is planning to launch a bitcoin futures contract in 2018 making it the third U.S. exchange operator to plan derivatives contracts off the crytpocurrency, Reuters reported on Wednesday. Nasdaq, which does not yet have a date for the product, currently offers a bitcoin-based exchange-traded note on its Stockholm exchange. 5. STANDPOINT SETS $20,000 PRICE TARGET: On Wednesday, Standpoint Research analyst Ronnie Moas raised his 2018 price target for bitcoin to $20,000 from $14,000. There is "no way to justify" gold investments equaling 40 times than that of bitcoin, the analyst argues. He thinks an argument can be made that bitcoin will be equal to gold in 10-15 years. Currently, gold has $7T in investments to bitcoin's $180B, according to Moas. 6. "OUGHT TO BE OUTLAWED": On Bloomberg Television Wednesday, Nobel Prize-winning economist Joseph Stiglitz said, "Bitcoin is successful only because of its potential for circumvention, lack of oversight. So it seems to me it ought to be outlawed. It doesn't serve any socially useful function." He added, "It's a bubble that's going to give a lot of people a lot of exciting times as it rides up and then goes down." 7. OTHER BITCOIN PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. PRICE ACTION: As of time of writing, bitcoin rose about 28% this week to $10,540 in U.S. dollars according to CoinDesk. Meanwhile, AMD shares fell 6% this week to $10.66 and Nvidia dropped nearly 10% on a weekly basis to $195.40. Bitcoin Investment Trust (GBTC) rose 25.7% this week to $1,620. WANT BITCOIN NEWS ALERTS?: To receive alerts on stories relating to bitcoin and other cryptocurrencies, Fly subscribers can enter "Bitcoin" into the "Add symbols" box of their portfolios.