- CME said that the future of bitcoin will be launched before the year runs out, thereby making the price of the cryptocurrency go above $6400.
- Themis Trading’s Joe Saluzzi who usually worries because the cryptocurrency is not regulated and is very open to fraud, said that it reminds him of the financial crisis all over again.
- The fear of Saluzzi is that the approval in the future might result to an open door to an ETF for bitcoin, and this will put the money of retail investors at risk.
Most of the people who trade cryptocurrency were having blast Tuesday because bitcoin gained approval in the future market, however not everyone experienced the party.
Following a statement by CME that it would launch bitcoin future before the year runs out, people became fearful that money would start coming in, thereby comparing it with a financial crisis which can be likened to the orgy of speculation.
Joe Saluzzi, a principal at Themis Trading said that he like the concept of bitcoin and does not have any problem with it. “The problem I have is that the innovators on the Wall Street are trying to package something and then put a derivative label on it whereas they are unaware of what is underneath. And this reminds me of the financial crisis again.”
The operation of bitcoin exist in an unregulated world of digital currencies, with about 60 exchanges across the world, and according to Bitcoin.org, two out of these exchanges are based in the United States. There can be a wide variation in prices because there is no underlying or mutual agreement on the pricing equipment.
Saluzzi is scared by this, just like the mortgages that are inside the collateralized debt obligations that assist in the precipitation of the crisis, it would be very difficult to determine the value of bitcoin and this will bring substantial risk into the market.
However, he worries that the approval by CME could legitimize bitcoin and regulators may be persuaded by this, thereby approving a growing list of requests for exchange-traded funds. According to CoinDesk, the price of bitcoin went above $6,400 on Tuesday.
With that bitcoin would be taken out of the arena of future markets and cryptocurrency exchanges where traders should know the risk, it will then be taken into the mainstream of investment where the ETF industry has been able to attract a sum of $3.3 trillion from investors and it still continue growing.
Saluzzi said that the major exchanges are desperate for an ETF on this thing.
The Securities and Exchange Commission has recently weighted in on bitcoin ETFs, they rejected a highly publicized request which was made by Cameron and Tyler Winklevoss. They made this decision because bitcoin lack regulatory infrastructure which would prevent its manipulation.
Saluzzi said that “It is possible for sprofing, layering and other kinds of manipulation to be going on in bitcoin now, without the acknowledgement of anyone.” “I think we are playing with fire until they say that they are watching and ensuring that there is no manipulation and fraudulent activities in the system, until we are assured of a better regulatory system.”
One of the officials of CME said that there would be more stability if bitcoin is brought out to a more open market.
There are a number of benefits of offering a future contract on a regulated marketplace, such benefits include price discovery, transparency as well as risk transfer, all these would enable institutions as well as other participant in the market to manage their risk with the development of the bitcoin market, a spokesman said.
The CEO of JPMorgan Jamie Dimon has threatened to sack any of his staff found trading cryptocurrency, and Larry Fink, the CEO of BlackRock which is the largest money manager in the world has recently called bitcoin an index of money laundering.
Although CME have their own pricing system which is called the Bitcoin Reference Rate, which will be used so as to value the future contracts. However, the BRR aggregates price from the major bitcoin exchanges at 4 p.m. London time.
“The BRR has been able to become the price reference for most financial institution, trading firms as well as data providers across the world because they’ve been able to reflect global bitcoin-dollar trading transparently and reliably.” This was said in a statement by the CEO of Crypto Facilities which is working with CME, Timo Schlaefer.
“He said that this is what they do, they are professional speculators. There is need for you to know what it’s all about.”
The retail investors are getting involved through the potential ETF that draws concern.
Saluzzi said that “until you have a good understanding of what is happening, I don’t understand how you can have an ETF.” “This is scary and it all starts like this.”