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Is bitcoin coming of age or on an unsustainable run?

The Edge Singapore
The Edge Singapore12/18/2017 8:0 AM GMT+08  • 7 min read
Is bitcoin coming of age or on an unsustainable run?
SINGAPORE (Dec 18): The launch of bitcoin futures, on Dec 10 on the Cboe Futures Exchange and on Dec 18 on the CME Globex platform, would seem to herald a maturing of the cryptocurrency. “You move from a one-way street to a two-way street. So, that is g
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SINGAPORE (Dec 18): The launch of bitcoin futures, on Dec 10 on the Cboe Futures Exchange and on Dec 18 on the CME Globex platform, would seem to herald a maturing of the cryptocurrency. “You move from a one-way street to a two-way street. So, that is good for the market,” says Steen Jakobsen, chief investment officer and chief economist of Saxo Bank.

A futures market allows participants to buy or sell something for delivery at a later date. They are usually formed because producers and users of a commodity want to lock in prices. Farmers sell crops that are still growing and airlines buy jet fuel they will need in months ahead. Currency futures are used in a similar way. An exporter might want to sell US dollars it is to receive for the sale of its goods and buy its home currency to pay its workers. Conversely, an importer may need to buy US dollars to spend on goods it buys. Lubricating these futures markets are traders, who may look for arbitrage opportunities or simply take a directional view on the underlying commodity or asset.

However, bitcoin is a long way from being a widely used currency like the US dollar. John Woods, managing director and chief investment officer for Asia-Pacific at Credit Suisse, notes that the daily transaction value for bitcoin is US$100,000 ($134,710) to US$200,000. By comparison, credit card transaction value was about US$700 million a day last year. “It seems to be more of a vehicle for speculation, and not for the day-to-day purchase of goods and services,” Woods says.

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