Charlie Lee’s Thoughts on the Future of Bitcoin and Litecoin

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While nearly everyone has been glued to the Bitcoin price charts as it draws closer to the $20,000 mark after the launch of CBOE futures last Sunday, litecoin, which is considered to be the silver to bitcoin’s gold has not been left behind. The budding cryptocurrency just recently surpassed the $100 mark and with its current momentum, the price should continue rising despite warnings by its creator, Charlie Lee.

The warning that he wrote on twitter apparently came as a response to the near 300 percent rise of litecoin’s price in a little over 48 hours. It read: “Sorry to the spoil the party, but I need to reign in the excitement a bit… Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value ($48 to $4). So if you can’t handle LTC dropping to $20, don’t buy!”

Litecoin is now the fifth-largest cryptocurrency with over $15 billion worth of market capitalization having rallied nearly 8,000 percent this year. While this should come as no surprise especially considering the price trends of other decentralized digital currencies, more so bitcoin, Charlie Lee is really surprised by its growth this year. In a phone interview with CNBC’s Squawk Box, Lee pointed out that the frantic growth in the prices of various cryptocurrencies was an impeding factor to the wider adoption as well as mainstream acceptance since most cryptocurrency users are using them as speculative assets instead of the real-world transactions they were intended for. Due to this, he believes that it will be five more years before people finally start to use bitcoin and litecoin as a currency to make real-world transactions.

“Bitcoin is very volatile, and litecoin is even more volatile that bitcoin,” he said. “I just want to warn people that they should invest responsibly. Don’t spend all of your life savings to buy a cryptocurrency in case it drops 80 percent.”

With cryptocurrencies gaining more popularity by the day, the buzz has attracted a lot of scrutiny and a fair share of criticism from policymakers with a considerable number of them having huge doubts about the overall appeal of decentralized digital currencies as mediums of exchange and stores of value. In fact, some others have openly dismissed the need for investing in bitcoin and have warned investors not to do so either. Unlike many cryptocurrency purists who have expressed their concern over government interference, Lee has been quite welcoming to the prospects of more regulation for cryptocurrencies – and this might compel the doubtful lot to change their minds and be a little optimistic about cryptocurrency.

“I think increased regulation will help to reduce the volatility of the coin. A lot of the recent gains have had a lot to do with countries like (South) Korea and Japan really getting into the cryptocurrency space,” Lee pointed out.

“Ever since China banned the bitcoin exchanges, (South) Korea has really taken up the mantle. There is a lot of frenzy in (South) Korea right now and I think that’s driving up the price.”

Futures Officially Launch as Bitcoin Price Reaches New Highs

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Bitcoin has indeed come a long way and it is now a step closer to legitimization with the recent launch of a product that allows investors to take bets on the cryptocurrency’s price in the future. This new contract on the Chicago Board Options Exchange was just in time for bitcoin’s 10% jump which was responsible for igniting fresh speculations that it was just a bubble especially after the prior 40% climb in price. The new Chicago futures trading indicates great optimism on the side of traders that bitcoin will trade at even higher prices come January.

When the futures exchange debuted on Sunday, bitcoin futures exploded thus forcing the Chicago Board Options Exchange to halt operations for a little while so that the market would cool down. Still, bitcoin which is the underlying asset, in this case, had a price bump of about 26%. It began at $15,460 before midnight on Sunday (London time) then surged forward to reach a record high $18,700 after which it had a slight relapse to $17,800. The price volatility exhibited within such a short period of time was responsible for a number of bumps including the halting of trading activities twice.

CBOE also explained that website was being strained by the stupendous amount of traffic in a tweet that read:

“Due to heavy traffic on our website, visitors to may find that it is performing slower than usual and may at times be temporarily unavailable. All trading systems are operating normally.”

Bitcoin is becoming more mainstream and the launch of this contract is just the beginning of what is expected to be a very smooth ride into the next year and beyond. CBOE has since stabilized and the exchange currently lists three bitcoin features that will each expire in the first three months of 2018. The final settlement value of all the three contracts will then be determined by bitcoin’s price on exchange Gemini. As it stands, the introduction of bitcoin futures is already curving up an upward trend for bitcoin’s price and now with the Chicago Mercantile Exchange (CME) planning to launch bitcoin futures of its own on the 18th of December, we can expect the price of bitcoin to surpass the $20,000 mark very soon.

Bitcoin Futures Trading Takes Crypto to Mainstream Finance

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Today’s intersection of digital money and traditional finance being held at LaSalle Street in Chicago is set to be a game changer being that it will be the first major U.S. exchange that offers a Bitcoin-related product. Bitcoin is considered to be a wildly fluctuating currency but the large demand from individual investors has driven the cryptocurrency to rise by more than 1,500 percent in 2017 – in the past two weeks alone, its value has shot up by about 85 percent. These type of gains are powerful investor magnets even though they are the core reason behind the division between central banks from various parts of the world and Wall Street executives.

CME Group Inc., another Chicago-based exchange, and Cboe Global Market Inc. are offering futures that are anticipated to allow for great inflows of institutional money while at the same time easing the process of betting on Bitcoin’s decline. According to Galaxy Investment Partners CEO, Mike Novogratz, trading will most likely start slowly – the company is currently raising a cryptocurrency hedge fund whose target is $500 million.

Novogratz further added that, “If people have expectations that it’s going to have huge liquidity on day one, they’re just wrong. It’s going to take a while to build liquidity. People need to go through at least one cycle to figure out how it settles.”

The derivatives trading that the world is now witnessing is a result of Bitcoins record-breaking scores this year that were fueled by the high price gains it exhibited as well as its rogue anti-establishment endeavor to become free from government or institutional control. Derivative contracts are expected to propel Bitcoin further into the regulators’ domains, as well as the realms of institutional investors and banks.

“Derivatives should have the effect of bringing a deeper liquidity to the market which should reduce volatility,” said chief investment officer and co-founder of Monaco-based Altana Digital Currency Fund, Alistair Milne. “As the whole cryptocurrency economy gets bigger the volatility should reduce.”