Digital currency bitcoin broke new ground on Wednesday, breaching the $11,000 mark on the global market a few hours after zooming past $10,000, more than double its price at the beginning of October ahead of the possible launch of the international futures exchanges seen as bringing calm to the chopy virtual currency market.
Both the global leading and most diverse derivatives marketplace, Chicago Mercantile Exchange (CME Group) and the Chicago Board Options Exchange have announced that they would launch bitcoin futures in the near future, a development seen as reducing the volatility and stabilising the market.
Major exchanges and digital currency indexes around the world now trade on the currency, which is beholden to no rules that are espoused by real financial market or economic activity. The price rise has been spectacular. It has grown more than 10-fold in value so far this year driven by increased institutional demand as its financial and mainstream use has expanded.
It traded at $968 as at December 31, 2016.
The crypto-currency has taken root in Zimbabwe’s convoluted monetary system. The southern Africa’s liquidity challenges and shortage of hard currency has given firms and individuals with urgent foreign transactions a new platform and its dear.
At the country’s only bitcoin exchange, Golix, it traded at $18,000 on Wednesday.
Why investors and traders suddenly got so positive about Bitcoin’s future?
Japan and Australia have gone as far as regulating bitcoin and other virtual currencies, officially recognising it as legal method of payment, a move seen as behind the price surge.
Experts believe this will push its price sky high, and improve its legitimacy. But the issue of legitimacy is already moot.
Bloomberg last week reported that American financial powerhouse, JPMorgan Chase & Co. is contemplating offering its institutional trading customers access to the bitcoin futures.
It also said over 100 hedge funds on Wall Street are now dedicated to virtual currencies.
Large investors, such as hedge funds, prefer to invest in assets and stores of value with high liquidity, which enable them to meet huge payments when they fall due. Bitcoin is one of such asset which these investors are finding more appealing as it gained much ground at international level.
As such, punters that have bet on bitcoin are likely to reap fruits as more investors and traders embrace the virtual currency.
Experts say speculation remains the major driver of bitcoin price hike as punters buy and sell bitcoins to profit from the demand. Nobel Prize winner Joseph Stiglitz says it ought to be outlawed as it “doesn’t serve any socially useful function.”
Despite constant fears of a crash, analysts say the market is tilting towards digital currencies, and that will only push its price up some more.
Additionally, bitcoins are increasingly becoming intrinsic to the international money-transfer system.In Zimbabwe, Bitmari is one such option and offsets the acute foreign currency shortages by facilitating offshore payments.
The other side of the coin is that bitcoin has also increasingly used to facilitate illicit transactions since bitcoin addresses, which are used as accounts are encrypted, thereby enabling those engaging in illegal transactions to demand payments from victims while hiding their identity.
Some illicit transactions include payments for ransomware, money laundering and externalisation.
Experts say smart money almost never takes unhedged bets, but the once provenance of computer geeks seeking an alternative monetary system unencumbered by regulations is becoming mainstream, bit by bit.–source