Investors have lost as much as 20 percent of their investments as the first monthly bitcoin futures contracts approach their expiry dates. This comes just one month after bitcoin’s highest-ever peak of almost $20,000 in December 2017, leaving many to conclude that their investments were placed at a tragically bad time as the world’s first digital currency begins to lose steam.
When bitcoin futures launched mid-December 2017 on the CBOE, the price of bitcoin surged as investors responded with enthusiasm. Yet the following weekend when the Chicago Mercantile Exchange (CME) launched its own bitcoin futures trading contracts, the price had already begun to dip.
The price of bitcoin futures at CBOE are pulled from Gemini, the first regulated Bitcoin exchange in the US which is owned and operated by the Winklevoss brothers, who collectively own over $1 billion in bitcoin.
Bitcoin’s move to Wall Street was largely viewed as the long-awaited green light for many to try their hand at profiting from the cryptocurrency industry without having to purchase any of the coins. The regulated financial product, however, did not deliver the results that most investors had expected, instead leading the Commodity Futures Trading Commission (CFTC) to look into the “self-certified regime” through which the CFTC-regulated CBOE and CME were licensed to operate.
There has also been sharp criticism from major banks, claiming that the launches were too quickly approved, as well as there being a lack of transparency on the actual workings of the contracts.
In addition, the North American Securities Advisors Association (NASAA) reminded investors of the “high risk of fraud” associated with cryptocurrencies, making special mention of futures contracts in its urge for investors to proceed with caution.
According to NASAA president Joseph Borg:
“Investors should go beyond the headlines and hype to understand the risks associated with investments in cryptocurrencies, as well as cryptocurrency futures contracts and other financial products where these virtual currencies are linked in some way to the underlying investment.”
Mr. Borg is also the director of the Alabama Securities Commission.
Borg continued in saying, “The recent wild price fluctuations and speculation in cryptocurrency-related investments can easily tempt unsuspecting investors to rush into an investment they may not fully understand. Cryptocurrencies and investments tied to them are high-risk products with an unproven track record and high price volatility. Combined with a high risk of fraud, investing in cryptocurrencies is not for the faint of heart.”