Summary:

  • Two reasons why higher interest rates could send the Bitcoin price back toward $1,000
  • The Bitcoin price has soared of late while a daily transactions volume has lagged behind. Is it a bearish signal?
  • CME and CBOE Bitcoin futures will vary making the latter much more liquid
  • Bitcoin (BTCUSD on xStation5) is a ’dangerous speculative bubble’ according to Yale University pundit

Bitcoin is slowly but surely nearing another major hurdle placed at $12,000 in anticipation of a launch of BTC futures at CBOE as soon as this Sunday and at CME a week later. However, along with the higher price and rising hype there is no a week without some gloomy remarks, comments and forecasts presented by various people. This time there is a guesswork that higher interest rates could depress exponential Bitcoin demand for two reasons.

First and foremost, when rates go up the opportunity cost will raise as well. That’s especially the case for investors buying Bitcoins with borrowed money as they could face ’margin calls’ once the digital currency declines severely. The second reason why higher interest rates could weigh on the Bitcoin price in that they might restore credibility among central banks and therefore to national currencies they control. Under this scenario, it could make alternative currencies such as Bitcoin less appealing to the general public. If those scenarios transpire, it could push the Bitcoin price as low as $1,142 which is to reflect the fundamental value of the virtual currency according to some estimates.

link do file download linkWhile the Bitcoin price has soared, a daily transactions volume has had a less impressive gain. Source: Bitcoin.com, XTB Research

Over the course of the past weeks the Bitcoin price surged, however a daily transactions volume was rising in the less impressive pace. In order to get slightly less chaotic movements we outlined moving averages (14) of daily transactions and the Bitcoin price at the chart above. As you can see the virtual currency price (SMA14) has already outstripped a daily transactions volume (SMA14) for the first time ever which could be a warning sign that the price is becoming more driven by rising hype rather that a real usage.

link do file download linkDifferences between Bitcoin futures offered by CBOE and CME. Source: Bloomberg

This Sunday will be a breakthrough moment for everybody interested in cryptocurrencies because CBOE will start offering Bitcoin futures while CME is expected to do the same a week later. However, there are some differences between instruments offered by the two exchanges suggesting that CBOE futures could be more liquid. Namely, CBOE will be offering more expiration dates compared to CME and also its contract size will be five times lower. In turn, one of the biggest dilemma in offering Bitcoin futures is pricing-data as there is no the sole price. Therefore, both CBOE and CME will rely on aggregate prices, however while CME will calculate its own price from several constituent exchanges, CBOE will outsource the calculation to the Gemini Exchange auction. Finally one needs to add that irrespective of disruptions both exchanges have their own contingency plans aimed at dealing with issues and limiting risk.

link do file download linkBitcoin (BTCUSD) is slowly but surely nearing $12,000 which could be a substantial resistance. On the other hand, buyers could look for a support nearby $11,100. Source: xStation5

At the end let’s mention another downbeat opinion with regard to Bitcoin expressed by Stephen Roach, a widely regarded economist and Yale University senior fellow. He said that Bitcoin is in a dangerous speculative bubble being a toxic concept for investors. He added that “I’ve never seen a chart of a security where the price really has a vertical pattern to it. And Bitcoin is the most vertical of any pattern I’ve ever seen in my career”. In this respect it’s worth reminding that Roach spent the bulk of his 30-year career at Morgan Stanley heading a highly regarded team of economists around the world.