The sudden surge in the price level may have been in part a result of a continued rally after the Chicago Merchantile Exchange(CME) announced plans to offer bitcoin futures. This move could add more institutional investors to bitcoin markets.
Bitcoin investors cheered the CME decision as a step toward legitimizing the cryptocurrency market, but the coin still has a considerable ways to go to gain widespread mainstream acceptance.
A new high for bitcoin
On Wednesday bitcoin prices broke through the $6,500 level for the first time. But on Thursday intraday it traded as high as $7,350 perhaps as Asian traders saw the CME announcement. Timothy Enneking, of Crypto Asset Management said that Asian investors were concerned about losing out on the rally.
After the rally there was a precipitous crash with a decline to $6,800. Such wide swings discourage institutional investors, and make bitcoin’s use as a currency difficult.
Even after the decline bitcoin’s price was far above that it had fallen to after the hard fork described in a recent Digital Journal article.. The price was well below $6,000 on October 28th.
Bumps in the road
The U.S. Securities and Exchange Commission(SEC) denied a proposal to launch a bitcoin exchange traded fund (ETF). Some bitcoin investors had hoped such a fund would bring in more institutional investors.
In turning down the proposal the SEC claimed that bitcoin had fundamental flaws that made it a dangerous asset class to force into an exchange traded structure. The flaws the SEC noted were price volatility, low liquidity, shallow trading volume and over-exposure to trading in countries that had weak regulatory structures.
Bitcoin investors are hoping that the CME decision, which still has to pass regulatory review, would lower volatility, and increase liquidity by bringing more players into the market.
The surge in the price of bitcoin on Thursday brought its total market cap of $121 billion. The total market value of ail cryptocurrencies was above $121 billion according to the website Coinmarketcap.
The end of the wild west?
Charles Hayter, CEO of the website Crypto Compare said of the CME decision: “This is bitcoin crossing the divide from the wild west of finance to the mainstream. Futures from an incumbent exchange bring bitcoin and cryptocurrencies into the regulatory fold. This allows more complex financial products to be created and will eventually open the doors to institutional money.”
Since the beginning of 2017 the price of bitcoin has risen 600 percent.
Cryptocurrencies may face further regulation. China recently banned initial coin offerings (ICOs) and even exchanges at least temporarily. Other countries as well including Russia are planning regulations. However, so far neither hard forks nor the threat of more regulation has dampened enthusiasm for bitcoin.
