Bitcoin price fluctuated wildly on Friday (8th December), at one point being worth more than $17,000.  That is over £12,000 is UK GBP.  Sadly to say for all Bitcoin owners, the price dropped by 14% on the day, so your not so hard earned cash is now worth a paltry $14,500 per bitcoin.

 

Bitcoin has increase by an unbelievable 70% in the space of a week.  Where is it going?  Why is it happening?

 

Critics of crypto currencies, and bitcoin in particular argue that this is simply another bubble, mirroring the boom and seemingly bust of bitcoin price last year.  Bitcoin fanatics believe it’s due to Bitcoin going mainstream.

 

One reason for the dramatic increase, bitcoins are now being more freely available, with Chicago-based Choe Futures exchange starting to trade bitcoins.  Other exchanges, such as CME (the worlds largest futures exchange) will also soon launch a Bitcoin exchange product

 

“Bitcoin now seems like a charging train with no brakes,” said Shane Chanel, from Sydney-based ASR Wealth Advisers.

A futures exchange lets people buy and sell contracts with each other at an agreed price in the future.

The stability of bitcoin is always under scrutiny, with regulations still largely uncertain.  The Futures Industry Association has expressed concerns to the US regulator, specifying that contracts have been approved without properly weighing up the risks.

 

“A more thorough and considered process would have allowed for a robust public discussion among clearing member firms, exchanges and clearing houses,” the association said.

Major banks are legitimising the bitcoin currency, a good example being Goldman Sachs who are going to get involved with clearing bitcoin futures contracts for an array of clients.

The Winklevoss brothers (of ex facebook fame) are some of the world’s leading investors in the currency, but other bigger, more traditional investors are scared away by the lack of regulation.  Although the evolving futures exchanges are started to change all this.

 

‘Major gamble’

 

So, is buying bitcoin more akin to putting your money in an ISA, or spending a day a the races.  It’s certainly a gamble.  Rarely do commodities see such a boom without a resulting bust.  The waters are very much unchartered, and it’s fascinating to see this one play out.