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Bitcoin Continues Downward Spiral Following Futures Trading

Andrew Hamilton

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bitcoin fall

In the final push to break a value of $20,000 per coin, Bitcoin has not only hit a brick wall, but is now slamming into it repeatedly.

Bitcoin has experienced – and is still enduring – its first major tumbles since its debut on a trader’s market. The trading of Bitcoin futures on the Chicago Board Options Exchange (Cboe) on Friday 8th December prompted an increase in the crypto-currency’s spot value of nearly 5%, and growth was relatively painless overall.

However, reports emerged early this Wednesday claiming that Bitcoin’s value had plummeted 15% overnight from Tuesday. Valued at $19,850 per coin last Sunday, the crypto-currency had been on the cusp of breaking the threshold of $20,000 per coin, double its value just three weeks earlier.

But Bitcoin missed the milestone, and instead suffered a sudden retrenchment in value of $1,300 per coin between Tuesday night and Wednesday morning. That fall only continued between Thursday and Friday, where in the space of 12 hours between midday Thursday and today, the crypto-currency plummeted another $1,500 in value.

As of midday today, Bitcoin’s value is holding at just over $14,000 per coin.

Financial Institutions Recognition

The launch of Bitcoin futures on the Cboe had been welcomed by experts on Bitcoin. Some asserted the event as a recognition of Bitcoin from major financial institutions as a viable investment, however many conservative moneymen remained unconvinced.

Bitcoin’s meteoric rise has been marked, even over the past few weeks. According to The Independent, it has increased in value-per-coin of 2% over last week, 110% over last month and 2,020% over last year. But this climb has not prevented the currency from a few hard knocks, and the tumble in its value between Tuesday and Wednesday is the latest episode of its staggered climb.

According to Coinbase, an exchange for Bitcoins, the crypto-currency’s value as of Wednesday morning was around $17,000. After peaking and troughing on Wednesday and Thursday between around $16,500 and $17,500, the coin then spiralled downward on Thursday night to its current valuation at just $14,000 today.

Leading Economists Surveyed

The fall comes amid the release of a survey of almost 50 leading economists, who assert that Bitcoin ‘poses no threat’ to general financial stability and is unlikely to shake mainstream markets should it collapse. The survey, conducted by the Centre for Macroeconomics and the Centre for Economic Policy Research, questioned academics from universities across Europe.

Bitcoin’s small size, in comparison to global financial assets, is given as one of the main reasons behind the sanguine attitude. Despite Bitcoin’s boom, its approximate value is approximately $250 billion, which pales in comparison to global financial assets (including debt markets, stocks, and derivatives) estimated at over $80 trillion.

However, the crypto-currency is reaching ever more financial systems, debuting on the Chicago Mercantile Exchange (CME) on Sunday evening. The CME became the second exchange to offer bitcoin futures trading, after Cboe. According to The Guardian, futures contracts on the CME initially spiked at over $20,000 before dropping in value, having been originally priced at $19,500.

Regulating Cryptocurrencies

Although the majority of responses to the economics survey believe in the limited financial risks surrounding Bitcoin, many also said that governments should look further into regulating cryptocurrencies. They claimed that crypto’s anonymity makes it easier to commit tax evasion and other criminal activities compared to traditional payment methods.

Nicholas Oulton, of the London School of Economics, said: “One strand of current policy is to crack down on money laundering and tax evasion through tax havens. So it would seem odd to let crypto-currencies get around these restrictions.”

Insider Trading

Their calls come amid reports that Coinbase is to launch a full investigation into allegations of insider trading levelled against its employees. According to CoinDesk, a number of Coinbase’s staff tipped off others to invest in the run-up to its listing of Bitcoin Cash on Tuesday – meaning a potential violation of trading rules.

According to Coinbase itself, Bitcoin Cash (a ‘hard fork‘ of Bitcoin) climbed to new heights on Tuesday, setting a new record of $2,500 in value, before rising 21% and hitting an all-time high of £3,700 on Wednesday. But this high has also been dashed from Bitcoin Cash, as it tumbled alongside its big brother between Thursday and Friday. As of midday Friday, the derivative has depreciated 30% in value, sinking back to around $2,500.

Legal Action

In a blog post, Coinbase CEO Brian Armstrong asserted that insider trading would not be tolerated. Armstrong wrote: “Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter. If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately and take appropriate legal action.”

Andrew Hamilton

Andrew Hamilton

PR & Content Executive at Hutchinson Networks

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