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Crypto TREND – Second Edition

In the first edition of CRYPTO TREND we introduced Crypto Currency (CC) and answered several questions about this new market space.  There is a lot of NEWS in this market every day.  Here are some highlights that give us a glimpse of how dynamic and exciting this market space is:

World’s largest futures exchange to create a futures contract for Bitcoin

Terry Duffy, president of the Chicago Mercantile Exchange (CME) said “I think sometime in the second week in December you’ll see our [bitcoin futures] contract out for listing.  Today you cannot short bitcoin, so there’s only one way it can go. You either buy it or sell it to somebody else.  So you create a two-sided market, I think it’s always much more efficient.”

CME intends to launch Bitcoin futures starting on December 10, pending regulatory review. If successful, this will give investors a viable way to go “long” or “short” on Bitcoin.  Some sellers of Exchange-Traded Funds have also filed for bitcoin ETF’s that track bitcoin futures.

These developments have the potential to allow people to invest in the crypto currency space without owning CC’s outright, or using the services of a CC exchange. Bitcoin futures could make the digital asset more useful by allowing users and intermediaries to hedge their foreign-exchange risks. That could increase the cryptocurrency’s adoption by merchants who want to accept bitcoin payments but are wary of its volatile value. Institutional investors are also used to trading regulated futures, which aren’t plagued by money-laundering worries.

CME’s move also suggests that bitcoin has become too big to ignore, since the exchange seemed to rule out crypto futures in the recent past. Bitcoin is just about all anyone is talking about at brokerages and trading firms, which have suffered amid rising but unusually placid markets. If futures at an exchange took off, it would be nearly impossible for any other exchange, like CME, to catch up, since scale and liquidity is important in derivatives markets.

“You can’t ignore the fact that this is becoming more and more of a story that won’t go away,” said Duffy in an interview with CNBC. There are “mainstream companies” that want access to bitcoin and there’s “huge pent-up demand” from clients, he said. Duffy also thinks bringing institutional traders into the market could make bitcoin less volatile.

Japanese village to use crypto currency to raise capital for municipal revitalization

The Japanese village of Nishiawakura is researching the idea of holding an Initial Coin Offering (ICO) to raise capital for municipal revitalization.  This is a very novel approach, and they may ask for national government support or seek private investment.  Several ICO’s  have had serious problems, and many investors are sceptical that any new token will have value, especially if the ICO turns out to be a another joke or scam.  Bitcoin certainly was no joke, but it was the first, and now there are many imitators, some of which may overtake Bitcoin eventually.

INITIAL COIN OFFERING –  ( ICO )

We did not mention ICO in the first edition of Crypto Trend, so let’s mention it now.  Unlike an Initial Public Offering (IPO), where a company has an actual product or service for sale and wants you to buy shares in their company, an ICO can be held by anyone who wants to initiate a new Blockchain project with the intention of creating a new token on their chain.  ICO’s are unregulated and several have been total shams, whereas IPO’s are regulated to ensure that investors are provided the information needed for due diligence.  A legitimate ICO can however raise a lot of cash to fund a new Blockchain project and network.  It is typical for an ICO to generate a high token price near the start and sink back to reality soon after.  Because an ICO is relatively easy to hold if you know the technology and have a few bucks, there have been many, and today we have about 800 tokens in play.  All these tokens have a name, they are all crypto currency, and except for the very well known tokens, like Bitcoin, Ethereum, and Litecoin, they are dubbed alt-coins.  At this time Crypto Trend does not recommend participating in an ICO, as the risks are extremely high.

As we said in Issue 1, this market is the “wild west” right now, and we are recommending caution.  Some investors and early adopters have made large profits in this market space; however, there are many who have lost a lot, or all.  Governments are considering regulations, as they want to know about every financial transaction in order to tax them all.  They all have huge debt and are strapped for cash.

So far, the crypto currency market has avoided many government and conventional bank financial problems and pitfalls, and Blockchain technology has the potential to solve many more problems.

A great feature of Bitcoin is that the originators chose a finite number of coins that can ever be generated – 21 million – thus ensuring that this crypto coin can never be inflated.  Governments can print as much money (fiat currency) as they like and inflate their currency to death.

Future articles will delve into specific recommendations, however, make no mistake, investing in this sector will be only for your most speculative capital, money that you can afford to lose.

CRYPTO TREND will be your guide if and when you are ready to invest in this market space.

Stay Tuned!

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