Bitcoin bubble warnings grow louder as futures trading begins on CME –as it happened

Graeme Wearden

from on 2017-12-18 17:44 (#3B0PD)

All the day's economic and financial news, as cryptocurrency bitcoin joins the world's largest exchange

5.43pm GMT

Time for a recap.

Bitcoin has made a subdued debut onto the world's largest futures exchange, as a series of politicians and officials voiced concerns about the digital currency.

We are enthusiastic about blockchain technology, and the current attention for Bitcoin could boost blockchain and digital currencies' development. But as we have argued above, we doubt whether Bitcoin itself has what it takes to become a serious mainstream payment systems contender. Instead, we think it is more likely for Bitcoin to return to its roots as a niche payment system. A niche asset adopted worldwide could still have a substantial user base and hence value. It is therefore impossible to say whether the current Bitcoin market price is "too high" for a niche asset.

Then again, we join the crowd of analysts observing typical bubble characteristics: the idea of an asset that is new, revolutionary, almost magic - hard to understand, but let's invest anyway because it will become huge. This idea is a form of "this time it's different"-thinking. "Yes we know about all those previous bubbles that popped, but Bitcoin is really, really different." We are not so sure.

5.37pm GMT

Here's our news story about the kerfuffle over Ikea's tax affairs:

5.04pm GMT

European stock markets have closed at their highest level in almost six weeks, following Wall Street's lead.

The German Dax led the charge, gaining 1.6%, with France's CAC and the Italian FTSE MIB both gaining 1.33%.

Risk on sentiment is driving trading, as investor optimism over the US tax bill being passed sooner rather than later is lifting stocks.

The 2 wavering Senators, which could have thrown the vote in the Senate slim majority are now back on side and the markets are cheering.

4.28pm GMT

France's call for G20 leaders to debate bitcoin regulation may win the support of Germany.

Bloomberg reports:

In Berlin, a Finance Ministry spokesman said it was watching "bitcoin and other cryptocurrency developments closely," adding that Germany's financial supervisor Bafin has already warned of the risks of cryptocurrencies for consumers.

4.10pm GMT

In Greece leftist prime minister Alexis Tsipras has urged banks to do more to clamp down on big time debtors, citing the banking system's record stock of non-performing loans.

"Liquidity needs to be restored to the economy " We need a responsible and effective way to deal with the problem of non-performing loans."

3.31pm GMT

Maybe some of these bubble warnings are getting through to investors.

The bitcoin futures price is now moving south, as more traders take a position via CME's new derivatives platform.

2.43pm GMT

Over in New York, the US stock markets has hit fresh record highs at the start of trading.

The Dow Jones industrial average has jumped by 138 points, or 0.5%, to 24,790 points. The broader S&P 500 index is also up, while rallying tech stocks have sent the Nasdaq higher too.

With the bill reducing corporation tax from 35% to 21%, there will be a windfall to US companies. With the possibility of share buy-backs and/or higher dividends by US Corporations, this will, in turn, increase the pace of interest rate hikes and see a stronger US dollar as a result.

The US Tax Bill will probably be voted on, pass and will turn up on the President's desk this week . A significant boost to the economy? "Oh yes, it is" cries President Trump, who calls it 'one of the great Christmas gifts' to the middle class. "Oh no, it isn't" answers the bond market, as 10yr Notes meander along at 2.37% this morning, and TIPS remain mid-range.

The bond market fell for the President's policy promises this time last year and is resolutely unimpressed this time round. 'Bah, Humbug' sums it up (at the risk of mixing panto-metaphors).

2.20pm GMT

Denmark's top central banker has now issued a stern warning to speculators to avoid bitcoin.

"You have to stay away [from bitcoin]. It is dangerous.

"It is not a regulated market. It is not the responsibility of the authorities. It is the responsibility of the individual."

1.38pm GMT

So far so smooth for bitcoin today.....

Today's economic calendar is relatively light; Bitcoin trades "quietly" for now... currently at ~19001

1.31pm GMT

Don't risk the scrum of present-hunters in the shops this lunchtime. Instead, pit your wits against our Christmas quiz....

1.14pm GMT

Breaking away from Bitcoin.... and the European Union has launched an investigation into whether Ikea is unfairly dodging tax.

The EU has opened an in-depth investigation into the Swedish furniture giant's tax deals in the Netherlands, and whether it used a Dutch subsidiary to slash its tax bill.

"All companies, big or small, multinational or not, should pay their fair share of tax.

"Member states cannot let selected companies pay less tax by allowing them to artificially shift their profits elsewhere."

#Stateaid: @EU_Commission opens in-depth investigation into the Netherlands' tax treatment of Inter IKEA https://t.co/utfDu0bUmS @EUinNL pic.twitter.com/0NOKK1jFuD

#EU investigating Ikea's tax arrangements should take a little of the sting from previous allegations that they were focusing primarily on #US firms

12.43pm GMT

We should note that CME's new bitcoin futures contracts actually covers five units of the digital currency.

So the 681 contracts traded so far today have a notional value of 3,405 bitcoins -- or around $65m.

12.26pm GMT

Singapore's financial watchdog has joined the chorus of concerns over cryptocurrencies.

Sopnendu Mohanty, the top fintech official at Singapore's monetary authority (MAS), has warned that people who have invested in bitcoin will come a cropper when they try to withdraw their funds.

Bitcoin has no fundamental value and is likely to end in tears once speculators discover how hard it can be to extricate their cash, Singapore's financial watchdog has warned.

Sopnendu Mohanty, Fintech chief for Singapore's monetary authority (MAS), said there was a crucial difference between Bitcoin and rival crypto-currency Ethereum, but it is far from clear whether either improves day-to-day transactions or has much potential as a tool for central banking.

12.15pm GMT

12.09pm GMT

The bitcoin futures price is also rallying.

The January contract has now jumped back to $19,645, over the opening price of $19,500, and ahead of today's 'spot price'.

11.50am GMT

Bitcoin is creeping higher again, as early bird traders head to their desks in America.

The spot price has jumped back over $19,000, erasing this morning's small dip as CME's futures trading got under way.

11.34am GMT

Swissquote Bank, an online bank based in Switzerland, has a more positive view of bitcoin than UBS.

It has been letting customers buy bitcoin since July, and today it added four other digital currencies - Bitcoin Cash, Ether, Litecoin and Ripple

Who would have thought at the start of 2017 that Bitcoin would increase 20-fold? That was simply unpredictable. The introduction of futures trading has driven up prices. Nonetheless, it is also artificially increasing supply and weighing on prices. In the short-run, Bitcoin is likely to reach US$ 25,000. A correction is due at some point, but within the next few years it should easily reach US$ 100,000.

By the way: Bitcoin is far from perfect, with high transaction fees and low scalability. And it is expensive, but it is even more scarce.

11.15am GMT

Newsflash: British manufacturers are ending 2017 on a high, with the strongest order books in 30 years.

That's according to the CBI's monthly healthcheck on UK factories, which found that exports and total output are both strong.

Manufacturing output grew at a robust pace in the three months to December, maintaining the momentum reported in the quarter to November. #CBI_ITS https://t.co/dE2FE2ahXD pic.twitter.com/heYKitC2vs

Order books remain, by a small margin, stronger than at any time since August 1988. #CBI_ITS https://t.co/dE2FE2ahXD pic.twitter.com/GZzSt9uLUO

11.06am GMT

Correction corner: I daftly called UBS a German bank earlier. It's Swiss, of course (the name dates back to Union Bank of Switzerland)

10.36am GMT

Update: Bitcoin is still hovering around the $18,800 mark, having dropped back from nearly $20,000 overnight.

The future price of Bitcoin is also quite stable on CME's platform. Just over 650 contracts for bitcoin's value in January 2018 have now been traded since last night. Right now, that contract is priced at $19,330, down from the opening price of $19,500.

This negative impact from CME futures on Bitcoin is likely temporary, just like it was with the launch of CBOE futures last week. Until the bulk of the volume of trading is done through futures, spot prices should dictate the futures price, not vice versa.

10.17am GMT

Bitcoin is a rubbish investment, literally!

"Individuals and companies are trading in Bitcoin and other virtual currencies all over the world.

So of course we're going to accept it from our customers."

Press release: 'Pay For Your Bin Collections With Bitcoin'

I mean, I know bin services are getting pricier but wow.

When you receive an email headed "Pay For Your Bin Collections With Bitcoin", you know it's nearly all over.

10.02am GMT

Dutch Bank ING shares some of Axel Weber's concerns over bitcoin.

In a new research note, ING argue that the digital currency will eventually return to being a "niche product for a select group of enthusiasts", rather than a revolutionary new currency that reshapes the financial system.

10.01am GMT

The Guardian's Business Today email has expanded its property coverage.

As well as key news headlines, an agenda of the day's main events, insightful opinion pieces and a quality feature, there is now more coverage of house prices, mortgages, the rental market - and the best picture galleries from our Money pages.

9.45am GMT

#Bitcoin is steady after touching new high Sunday of $19,757 as futures trading started on CME. Now at $18,813

9.38am GMT

France's finance minister, Brune Le Maire, has also waded into the bitcoin debate.

He wants the G20 group of leading advanced economies to debate the whole issue of digital currencies next speing.

"I am going to propose to the next G20 president, Argentina, that at the G20 summit in April we have a discussion all together on the question of bitcoin." Le Maire told French news channel LCI.

"There is evidently a risk of speculation. We need to consider and examine this and see how (...) with all the other G20 members we can regulate bitcoin."

French finance minister calls for bitcoin regulation debate at G20 | Article [AMP] | Reuters https://t.co/IZy63vFHSK

9.17am GMT

The FT have published a good take on the battle between the two rival Chicago-based financial exchanges to offer bitcoin derivatives.

Here's a flavour:

The bitcoin futures race began in earnest on Sunday as exchange operator CME Group challenged another Chicago exchange that had launched the first digital-currency futures a week before.

In the first three hours of trading, nearly $50m in bitcoin futures changed hands on CME, the world's biggest exchange operator by market value.

9.05am GMT

The launch of bitcoin futures contracts has two significant implications.

Firstly, it makes it easier for institutional investors to take a position in bitcoin. They don't have to actually buy and sell digital currencies, let alone mine them by cracking complicated maths problems.

Introducing futures contracts in the US was meant to give short-sellers access to the market and improve liquidity, but availability is still fairly restricted. The introduction of bitcoin futures on the Chicago Mercantile Exchange over the weekend may help, but it will take time.

Until it becomes easier to sell short, buying dries up, or there are tech issues or a major hack, bitcoin will keep passing milestones with alarming regularity. Right now, there's a long queue of investors, both amateur and professional, still waiting for a ride. This bubble is not bursting yet."

8.49am GMT

CNN Money reckons the bitcoin bandwagon "just keeps rolling on", with the launch of futures trading on CME.

They say:

The involvement of top financial institutions in the bitcoin market underscores its growing mainstream acceptance even as government officials, business leaders and economists continue to warn people against investing in it.

The CME launch "adds considerable legitimacy" to bitcoin trading, said Shane Chanel, an adviser at Australian investment services firm ASR Wealth Advisers.

The bitcoin bandwagon just keeps rolling on. https://t.co/nqVVAaIyML

8.37am GMT

Swiss bank UBS has warned anyone keen to invest in bitcoin that they risk losing their money.

"We as a bank have consciously warned against this product because we do not assess it to be valuable or sustainable."

"As soon as small investors invest, the regulators are required....

I would welcome an discussion with regulators about cryptocurrencies.

8.22am GMT

Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

"We saw a nice open on light volume, but pretty uneventful so far,"

"This is a brand-new asset class and I think perhaps a lot of investors want to sit back and see how this plays out before dipping their toes in this market."

European Opening Calls:#FTSE 7503 +0.16%#DAX 13188 +0.65%#CAC 5386 +0.69%#MIB 22214 +0.54%#IBEX 10210 +0.59%

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