bart chilton

Former U.S. Trading Commissioner Bart Chilton has long been critical of the fact that regulators have largely allowed the cryptocurrency markets to operate without oversight.

Last year, Chilton — who ran the Commodity Futures Trading Commission (CFTC) from 2007 to 2014 — called for President Obama to personally instruct the CFTC to establish basic consumer protection legislation, and he has repeatedly warned bitcoin devotees that lack of regulation is a “blind spot” for the industry and could prove to be its undoing.

However, recent developments have made him optimistic that the cryptocurrency markets are maturing and could turn a corner into the mainstream.

“I do think it’s sustainable,” Chilton said of bitcoin during an interview with Fox Business Network’s Maria Bartiromo, declaring that JPMorgan Chase chief executive Jamie Dimon is wrong to call it a “fraud”.

“I don’t know if it’s sustainable at these prices,” he continued, noting that the bitcoin price had experienced a flash crash of almost $1,000 earlier this week. Bitcoin’s volatility has been a sticking point for Chilton in the past, and he has stated that if he still chaired the CFTC he would investigate what he believes is naked market manipulation on bitcoin exchanges.

However, he says that derivatives exchange operator CME Group’s announcement that it will list bitcoin futures contracts could be a tipping point in this regard. Flash crashes won’t “happen to that extent on the futures, because they will have…circuit breakers” that limit the degree to which contract prices can fluctuate on a given day, he explains.

Of course, many bitcoin advocates fear that regulations will stifle innovation. New York’s so-called “BitLicense,” for instance, famously led to an exodus of bitcoin services from the state.

Nevertheless, Chilton maintains that basic consumer protections such as limiting price volatility and reducing counterparty risk are critical to the nascent technology’s continued growth.

“They don’t have to be crazy, overly-zealous regulations,” he concluded. “I think the bitcoin enthusiasts are starting to get this, but it’s been a while,”

zimbabwe bitcoin

The bitcoin price is approaching $14,000 in Zimbabwe as locals have turned to the most prominent cryptocurrency as a vehicle to escape the country’s dire economic and monetary situation.

The bitcoin price has soared to record levels in recent weeks and has positioned itself to surpass even the most bullish year-end price targets. This is especially true following the suspension of SegWit2x, the controversial hard fork that seemed likely to initiate a blockchain and community split.

As phenomenal as this growth has been, however, it pales in comparison to the bitcoin price surge that can currently be observed on bitcoin exchanges in emerging markets like Zimbabwe.

A decade ago, Zimbabwe became infamous for what may be the most extreme case of hyperinflation in modern history. The situation became so dire that the country’s central bank began printing hundred trillion dollar notes. Eventually, the fragile monetary system collapsed, and the country adopted the U.S. dollar as its official currency.

bitcoin price
Source: Drew Stephens / Flickr

However, the country has struggled to acquire and maintain enough physical dollars to meet demand, so the government has compensated by printing bond notes that are supposedly backed by USD at a one-to-one ratio.

But due to the bank’s dismal history of monetary policy, the bond notes trade at far lower than their stated value. Moreover, foreigners do not accept them, so all imports must be paid for with USD or other trusted currencies. This steady outflow of dollars has worsened the situation, leading the government to implement strict currency controls that have more or less failed to produce the desired effect.

Because of the cash shortage, banks have placed extremely low daily withdrawal limits — often $50 or less — and Zimbabweans stand in line for hours just to obtain this small amount of money — money that is rightfully theirs.

Due to their inability to obtain physical dollars and the capital controls that restrict locals from paying for imports with USD, many Zimbabweans have turned to bitcoin — which they can purchase without having access to physical currency — to store their wealth and pay for imports.

“Bitcoin isn’t subject to the central bank measures so it has become an alternative that importers are willing to pay a premium for,” Zimbabwean technology analyst Nigel Gambanga told CNN in a recent interview.

Demand for cryptocurrency far exceeds supply, causing bitcoin to trade at premiums as steep as 100% within the country. On Harare-based bitcoin exchange Golix, for instance, the bitcoin price has risen as high as $13,900 — more than $6,500 above the current global average price. As of November 10th, 2017 – it sits at around $13,500.

But, faced with a choice between dubious bond notes and a currency whose inflation is outside the hands of a central bank, Zimbabweans are willing to pay that price.

goldman sachs bitcoin

Goldman Sachs chief executive Lloyd Blankfein is not comfortable with bitcoin, but he does not want to rule out its potential to disrupt the accepted notion of what constitutes “money”.

Speaking with Bloomberg TV at the Goldman Sachs Sustainable Finance Innovation Forum in New York, Blankfein explained that although the concept of digital currency gives him a “level of discomfort,” he does not want to dismiss it out of hand.

“I have a level of discomfort with it, as I have…with anything that’s new,” he reflected, “But I’ve learned over the years that there’s a lot of things that work out pretty well that I don’t love.”

As an example, Blankfein says that when he first encountered the cell phone, he thought it was a ludicrous invention that no one would want. “I missed that one,” he joked.

He notes that, similarly, people have initially expressed discomfort with new incarnations of money as it has evolved from a hard asset into paper currency backed by a hard asset into its present state as a currency backed by government fiat.

“Maybe in the new world, something gets backed by consensus,” he said, referring to the fact that cryptocurrency’s value is backed by neither hard assets nor government authority. “Instead of a government fiat, maybe it’s a consensual arrangement by people that agree that it’s worth something.”

Blankfein’s open stance on bitcoin provides a stark contrast with that of JPMorgan Chase chief executive Jamie Dimon, who has called the cryptocurrency a “fraud” on multiple occasions and has said that bitcoin investors — a group that includes his own daughter — are “stupid”.

“It’s not my natural state of comfort,” Blankfein continued,  but…if we went into the future and bitcoins were successful, I would be able to explain how it was a natural evolution from hard money….Maybe 200 years from now even someone like me might be comfortable with it,” he concluded, “And that’s why I say that I am open to it.”

wall st bitcoin

Wall Street analyst Tom Lee believes that bitcoin’s enormous upside makes it an “important” asset for investors to own.

Lee, a managing partner at Fundstrat and a former chief equity strategist at Goldman Sachs, explained his reasoning earlier this week at Yahoo Finance’s All Markets Summit, stating that bitcoin represents a “huge revolution in terms of decentralized control”:

“It’s a huge revolution in terms of decentralized control,” Lee said. “It’s biomimicry, finally, in the technology industry. A proper structure for maintaining encryption and security. But because of the nature of blockchain it’s also an asset class.”

The market strategist, who has been described as one of Wall Street’s “biggest bears”, is quite bullish about both the short- and mid-term prospects of the bitcoin price.

Wall Street acknowledges Bitcoin’s rise

He believes that increasingly, younger investors will begin to use bitcoin as a store of value instead of precious metals, which served this purpose during the pre-digital era. Moreover, he notes that the bitcoin price is uncorrelated to equities and traditional market factors, making it an “important security” for investors to own.

“And I think this year has proven that Bitcoin is uncorrelated to equities, gold, interest rates, commodities. It’s an important security, I think, for investors to own.”

Using a model based on Metcalfe’s law — which states that the value of a network is proportional to the square number of that network’s user base — he has established “conservative” bitcoin price targets of $6,000 by mid-2018 and $25,000 by 2022.

“If you modeled something as simple as square the number of users plus transaction value, it’s explained 94% of [Bitcoin’s price appreciation] this year,” Lee said. “Using a 90% deceleration of both factors [in Metcalfe’s Law] next year gets you to $6,000 by mid-2018”.