Despite the sceptics, bitcoin is finding some heavyweight proponents - KDTV6 CYPTO NEWS

Tuesday, December 5, 2017

Despite the sceptics, bitcoin is finding some heavyweight proponents

Since I wrote about the “bitcoin bubble” last week, the crypto-currency, or “digital gold” as it is now referred to, has attracted almost as much attention from commentators and central bankers as Brexit.

On Thursday, bitcoin rose 15 per cent to a new high of US$11,395, before falling to $9,000 a few hours later. It began this week with another boomlet, this time hitting $11,800 (briefly) on the Asian markets, an increase of 12-fold in a year, before dropping back again. That’s a scary level of volatility, which prompted a new battery of warnings from serious-minded regulators, but also flushed out an impressive array of supporters who have presented some sensible and cogent reasons why it should go even higher. And for making us sceptics think again.

I might think it is a bubble ready to burst, as I argued last week, and so might a wide circle of central bankers, economists and commentators. Yet there are plenty of sober-minded analysts who have delved deeper into the bitcoin phenomenon than any of us and who are not surprised at all by its strength and resilience - and believe it can go even higher. My argument, I fully acknowledge, relies heavily on long experience of past bubbles and the conviction that no market for any commodity, from shares to minerals, wine, art or property, has ever risen in a straight line and every boom is followed by a bust. Even bitcoin can’t defy gravity forever, and the old stock market rule that the faster the rise, the bigger the fall still holds true. A rise of over 1,000 per cent in a year in any decent-sized market - and there is now over $350 billion worth of bitcoins in circulation - is unprecedented.

I am far from alone in holding that view. Sir Jon Cunliffe, the deputy governor of the Bank of England, solemnly warned last week that no central bank stood behind bitcoin and in his view “investors need to do their homework” – which meant take care. The president of the New York Federal Reserve, William Dudley, echoed his view. “I would be pretty cautionary about it. I think that it’s not a stable store of value,” he said at an event in New Jersey. “I would be, at this point, pretty sceptical of bitcoin.”

The Chicago Mercantile Exchange and Chicago Board Options Exchange are on the point of launching futures markets in bitcoins within weeks, making it easier for traders to take profits or cover losses. Concerned at losing out in a rapidly growing market, Nasdaq also announced plans to launch bitcoin futures contracts next year, a major recognition than the market is here to stay and should be taken seriously.

Even the big banks, who had previously dismissed the cryptocurrency market with contempt, are having second thoughts. This week the respected JP Morgan analyst Nikolaos Panigirzoglou ventured the view that bitcoin could soon join gold as a reliable, long-term way to store wealth and develop into a traditional asset class.


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