In her final press conference, Fed Chairperson, Janet Yellen, answered some questions today regarding Bitcoin. She stated that she sees any financial stability risk from Bitcoin as “limited”, saying she sees no significant exposure to our core financial institutions due to its price fluctuations. Earlier, when asked about the potential for regulation, she said that the Fed does not consider the impact of Bitcoin to be great enough to consider any regulation at this time.
There has been a lot more activity in the Bitcoin and cryptocurrency world over the last few days, and most of it is quite different from the past. This week marked the beginning of the sale of Bitcoin futures on the Chicago Board Options Exchange. Many people thought this could start a big slide, as short interest would take over. Others thought it would go up, as the currencies are not seeing legitimacy. But neither really happened – after an initial spike, the price has stabilised in a somewhat surprising way! In fact, we have learned that some of the larger investors who attempted to short the currency are carrying very large losses. Next week the Chicago Mercantile Exchange will begin trading a futures option as well, so we will just have to wait and see how it all plays out.
All in all, this is a very interesting time. Most of the financial “talking heads” still consider it a bubble and warn that the whole thing will end in tears. But cooler heads point out that the underlying blockchain technology is a game changer. And the appearance of Gemini founders, the Winklevoss twins, on several of the major financial channels was a head turner. These gentlemen were very mainstream, looking and talking the part as one might expect from billionaire investors in any asset class. In a word, they made a compelling case for stability.
What most of the press misses is that there are multiple ways to invest in cryptocurrencies. Yes, you can buy and hold, but you can also buy and put your asset to work creating growth in addition to whatever the currency does in the long term. And it almost appears that the uninformed believe you have to plop over $16,000 (or whatever the current price is) to invest, but that is simply not the case. As you no doubt understand, you can buy 0.1 Bitcoin, 0.001 Bitcoin or any fraction you like and feel comfortable to buy.
We believe that both sides are correct. There is no doubt that the Bitcoin is highly valued, and there will probably be a big pullback in the not too distant future. And we always advise extreme caution in any crypto currency investments. But at the same time, we do not believe this will be anything more than a larger than usual swing in an already volatile asset. Time will tell who is right – it will be an interesting ride.