Bitcoin Futures

Cboe Global Markets Inc. revealed today that it is to begin its bitcoin futures trading on the 10th December, beating fellow Chicago-based CME Group at becoming the first regulated exchange to trade the digital currency.

After receiving approval from the U.S. Commodities Futures Trading Commission (CTFC), in a press release, Ed Tilly, Chairman and Chief Executive Officer of Cboe Global Markets, said:

Given the unprecedented interest in bitcoin, it’s vital we provide clients the trading tools to help them express their views and hedge their exposure. We are committed to encouraging fairness and liquidity in the bitcoin market. To promote this, we will initially offer XBT futures trading for free.

Bitcoin Futures Exchanges are coming in the near future

Similar to CME, Cboe’s bitcoin futures will be cash-settled; however, they will be based on the Gemini Trust, the digital currency exchange founded by Cameron and Tyler Winklevoss. On the other hand, CME will base their prices on four cryptocurrency exchanges, including Kraken, itBit, Bitstamp, and GDAX.

According to the release, trading will commence at 5:00 p.m. central time on Sunday, and Monday, 11th December, will be the first full day of trading. Through December, trading will be free, the release adds.

In a race to offer bitcoin derivative products via major exchanges, Terry Duffy, CME Group Chairman and CEO, revealed at the beginning of the month that it is to start trading on the 18th December.

At the time, Duffy said:

We are pleased to bring Bitcoin futures to market after working closely with the CFTC and market participants to design a regulated offering that will provide investors with transparency, price discovery, and risk transfer capabilities.

The news of Cboe and CME receiving approval from the CFTC means that it could attract more investors to the digital currency market. Not only that, but it will be a step closer to legitimising the cryptocurrency, which is often linked to criminal activities.

Furthermore, at present, bitcoin is bought and sold on exchanges that remain unregulated. Many, however, feel uncomfortable with this despite the fact that market prices are continuing to soar to record highs.

Just last week, billionaire investor Mark Cuban stated that the approval of the bitcoin futures on major exchanges will be seen as ‘generally positive‘ on the digital currency, stating:

What they charge is critical. Transaction costs are relatively high for BTC. If this pushes transaction costs lower, it will be a benefit to the BTC market.

Featured image from Shutterstock.

cryptokitties

Cryptokitties are some man’s best friend. A cryptokitty has sold for over $100K. Ethereum allows users to execute smart contracts, and CryptoKitties uses this functionality to buy, sell, and breed CryptoKitties. Now, 13% of the Ethereum blockchain transactions are related to cryptokitties. Cryptocurrencies are often referred to in a very serious manner, and it’s easy to forget that the people using them are still human, and are prone to having fun on occasion. This is one of the funnier things that cryptocurrencies have been used for.

Cryptokitties are worth quite a bit

CryptoKitties are both something fun you can do with Ethereum and are a pretty good tech demo to show what can be built with Ethereum – not to be confused with CryptoCat. CryptoKitties can be bred together, taking into account some genetics from previous breed – specific breeding has the chance to create a ‘fancy cat’. ‘Fancy cats’ are based on real people and are extremely rare. For example, there is one named after Elon Musk with the name ‘Feline Musk’. The market for these cats is growing quickly, and the very first cat ever made, named Genesis, sold for 246.9 Ether. At that time, 246.9 Ether was worth $117,712.12, a shocking amount. the average kitty sale price at the time of writing was $44.62, according to kittysales.

Remember the Bitcoin Pizza?

On May 18, 2010, bitcoin user under the username ‘laszlo made a post on the bitcointalk.org forum, specifically the marketplace where trades for bitcoin were negotiated and executed. The user requested that someone order them two pizzas to be delivered to their address in exchange for 10,000 bitcoin, worth $41 on the now-defunct bitcoinmarket exchange according to a user on the thread. The trade was reported as complete on May 22, 2010 by laszlo. If the trade had been conducted today, these coins would be worth $116,681,758.46 USD at time of writing. Converted the other direction, the $41 originally paid would have been 0.003509819595950491 BTC.

bitcoin price

The bitcoin price stormed past $11,000 on Friday following the announcements that two U.S. derivatives exchanges have received regulatory approval to list bitcoin futures contracts within the near future.

Friday morning, CME and CBOE, both headquartered in Chicago, separately announced that they had received the green light from the Commodity Futures Trading Commission (CFTC) to create and list bitcoin futures products on their trading platforms. CME’s futures will launch December 18, while CBOE has yet to set a target release date.

The announcements flipped an ignition switch in the markets, and traders initiated a buying frenzy. Shaking off concern that it was in the midst of a retrace or on the back side of a bubble cycle, the bitcoin price leaped to a two-day high of $11,161 on bitcoin exchange Bitfinex.

bitcoin price
Source: BitcoinWisdom

Neither CME nor CBOE’s bitcoin futures will have a direct impact on the asset itself because the contracts will be settled with cash rather than bitcoins.

However, most analysts expect that Wall Street firms will feel more comfortable wading into the cryptocurrency ecosystem once exchange-traded products are available. Investors also believe that Wall Street capital will eventually flow into the underlying markets themselves, raising the price of bitcoin and other cryptocurrencies. Eventually, an exchange may even launch a futures contract that is settled with the asset itself, rather than cash.

Barry Silbert, chief executive of the Digital Currency Group, told CNBC’s “Squawk Box” that he anticipates that the launch of bitcoin futures will also usher in the first Bitcoin ETF, an investment vehicle that will make bitcoin more palatable to retail investors who want exposure to the price movement of bitcoin without the risk of holding the asset directly.

“I think it is going to enable finally the approval of bitcoin ETFs, and other digital currency ETFs, which is game changing,” he said.

At the time of writing, bitcoin was trading at a global average of $11,151, according to the BlockExplorer Bitcoin Price Index, giving the world’s most prominent cryptocurrency a $186 billion mark cap.

white house press sec

The White House Press Secretary, Sarah H. Sanders, said on Thursday that bitcoin and other cryptocurrencies are “being monitored”, and did not explain further when asked about what specifically is being looked at. This past year, the IRS won a case to get information from Coinbase and the SEC has made its thoughts known on ICOs – the US government is certainly watching. It’s even possible that actions that could be taken include some bans and required registration of accounts – or just more clarifications as have been seen from the SEC and FINCEN.

View the footage here:

Are cryptocurrency bans still a possibility? Would it even matter?

Bitcoin and cryptocurrencies in general could be seen as ‘unregulated’ in the eyes of the White House – especially the Department of Homeland Security – and as such it is still a possibility in the future that they may decide that an outright ban is necessary. Obviously there is the question of whether or not banning a cryptocurrency is possible at all. The short answer is not really, the long answer is that cryptocurrencies are (usually) decentralised; and as such, this means that there is not any one place that could be closed down to stop the trade and use of cryptocurrencies. That being said, the one thing that is somewhat centralised is exchanges, and if the various US based exchanges were banned or otherwise forced to close down (at least towards customers in the US). This would cause both a drop in buying power and create uncertainty in the market about the actions of other nations where exchanges do business, as these nations may feel the same way the US does and as such decide to take the same action. Banning or otherwise closing exchanges with overly burdensome regulations will not remove all transactions using cryptocurrencies in a given nation though, as private transactions would still take place – assuming that the top 25 cryptocurrencies still have worth than the two (or more) parties involved in the transaction will be willing to transact.

 

coinbase

A U.S. District Court judge has ordered bitcoin exchange Coinbase to provide the Internal Revenue Service (IRS) with the transaction records of more than 14,000 customer accounts.

The ruling (PDF), which was filed in the Northern District of California’s San Francisco courthouse, compels Coinbase to provide the IRS with customer records for accounts that had at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any single year from 2013 to 2015. Coinbase estimates that 14,355 accounts will fall subject to the purview of the summons.

Since the IRS classifies cryptocurrency as property, all cryptocurrency holdings are subject to capital gains taxes at the time of disposition. However, the IRS claims that virtually no U.S. taxpayers have reported bitcoin-related investment income on their annual tax returns. Armed with this data, the agency will be able to identify and levy penalties against investors who have skirted their legal obligations to pay taxes on their bitcoin investments, and — in some cases — prosecute offenders for tax evasion.

“That only 800 to 900 taxpayers reported gains related to bitcoin in each of the relevant years and that more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin in a given year suggests that many Coinbase users may not be reporting their bitcoin gains,” U.S. Magistrate Judge Jacqueline Scott Corley wrote in her ruling. “The IRS has a legitimate interest in investigating these taxpayers.”

The ruling did not come as a surprise. Earlier this month, the judge told Coinbase in a hearing that she was inclined to “give tremendous discretion to the agency as to how they investigate” whether people are making money on their bitcoin investments. Following that hearing, Coinbase published a blog post that more or less conceded defeat but took solace in the fact that the company had successfully forced the IRS to narrow its initial summons, which sought records from approximately 500,000 customers.

Despite the narrow focus of the final order, the successful defense of the summons will likely encourage the IRS to ramp up its efforts to bring bitcoin users into compliance with tax reporting obligations — particularly following the industry’s dramatic growth in 2017.

Featured Image from NPR/Dennis Brack/LandovIRS-v-Coinbase-order