The Bitcoin market, the leader of “Crypto-currencies” introduced to the international financial system by the mysterious inventor Satoshi Nakamota in 2009, has grown tremendously by 1578% since the beginning of the year, surprising the whole world. The price of 1 bitcoin, which was traded under $1000 at the beginning of the year, rose to $15973 as of December 7, 2017.
Cryptocurrency can be defined as virtual money that is used via the internet and is not affiliated with a central bank or institution. These coins can be removed from the virtual wallets where they are placed with certain passwords and can be used with the help of certain passwords. It should be noted that cryptocurrencies, which individual and institutional investors can use as payment instruments, are not printed, unlike USD, EUR, etc. There are over a thousand cryptocurrencies in the market. Bitcoin, Ripple, Litecoin and Dash are the leading ones among them.
Bitcoin-Blockchain
Bitcoin, the most prominent among cryptocurrencies, is limited to 21 million units. Currently, over 16 million bitcoins are traded on the market. According to this white paper, it means that a maximum of 4 million new bitcoins can enter circulation. The entry of new bitcoins into the system depends on the solution of a 16-digit password, which requires extremely high knowledge and hardware.
The fact that the decryption earns 12.5 bitcoins increases the attractiveness of the market. Blockchain, on the other hand, is a database that enables encrypted transaction tracking and is used not in one place, but in more than one place, in other words, the entire network. Due to its high reliability, it seems that there will be an inevitable development in the banking of the future.
Introduction of Bitcoin to Futures Exchanges
The first bitcoin futures contract (VIS), which is considered an important step towards the acceptance and recognition of cryptocurrencies, was launched at CBoe on December 10. On December 18, CME opened its virtual currency futures contract. It will be followed by the Nasdaq in early 2018. The size of the Bitcoin Futures contract on the CME is 5 bitcoins.
This equates to $78 thousand at current prices, and individual investors will need to deposit an initial margin of approximately 28 thousand dollars, which is a serious amount for the position. Contract settlement will be in cash, pricing will be based on the Chicago Exchange Bitcoin Reference Rate (BRR) and Bitcoin Real Time Index (BRTI). It is stated that this data consists of mismatched limit orders from the cryptocurrency exchange, which can create serious problems such as transparency and hacking.
Bitcoin whales
Will the Bitcoin craze, which continues to create new riches every day, continue? Are Bitcoin earnings real? Or will this bubble deflate? One of the factors behind the recent increases is that cryptocurrencies will begin to be traded on futures exchanges. This development means that the virtual currency is accepted and recognized by the official authorities, as well as a fresh institutional fund inflow to the market.
The increase in demand of those who see cryptocurrencies as a “store of value” tool and buys them also fuels prices. It is hard to believe, but the number of people who believe that the value of 1 bitcoin can reach 1 million dollars is not to be underestimated. A serious criticism of cryptocurrencies is that price movements are not based on trading algorithms, but on specific media and brokerage news.
Sometimes even a single tweet can cause panic in the market. The 1000 or so called Bitcoin Whales own about 40% of the market. Contracted purchases and sales of these people, who have close relations with each other, may cause speculative increases in the market. For example, a bitcoin that rose to $18465 during the day on December 8, fell to $15000 in 20 minutes with the news that 4700 bitcoins worth 70 million dollars were stolen from a digital platform.
Bitcoin is a virtual currency that is not based on a central bank or a regulatory agency, and is traded on the internet. It would be more accurate to use the definition of unit of account since it is not physical. Despite the madness, the use of bitcoin-like cryptocurrencies in money laundering and confidential transactions brings along auditing problems. The introduction of legal restrictions and regulations on cryptocurrency trading by monetary authorities may lead to the demise of the “bitcoin bubble”.
In the case of Turkey, it is observed that the interest in cryptocurrencies like bitcoin is gradually increasing. Some websites offer investment opportunities to their corporate and individual customers in this market. However, increasing risks should not be ignored in this market where there is a large regulatory gap and where “bitcoin whales” dominate.
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