Bitcoin approaches adds some legitimacy to the cryptocurrency, but there is a downside, noted Madden Street analyst Nick Colas told CNBC on Friday.
He’s interested that over the next couple of weeks hackers will try to get into the pocketbooks and exchanges that trade bitcoin in order to drive prices down, as serenely as cause uncertainty about the quality of the underlying asset. Then they can procrastinate in the futures market in an effort to make money.
“That is the danger of tacking a very established asset type, like futures, to the Wild West, which is the bitcoin ecosystem. That, I weigh, is what a lot of market observers, particularly in the futures market, are worried approximately and rightly so,” Colas, the co-founder of DataTrek Research, said in an interview with “About Bell.”
Colas was the first Wall Street analyst to cover bitcoin, which has been on a peculiar ride of late. The digital currency soared from about $11,000 on Monday morning to heavens $19,000 on Thursday.
It then dropped down to about $15,000.
On Friday at 5:35 p.m. ET, bitcoin was custom at $16,150 on Coinbase, which accounts for about a third of the digital currency’s measure on any given day. The price on Coinbase has traded at a premium to the level on other reciprocities.
The volatility comes as two exchanges ramp up to start trading futures compresses on the cryptocurrency in the upcoming days.
On Sunday, Chicago-based Cboe Global Calls is set to launch bitcoin futures, and CME, the world’s largest futures exchange, is planning to found its futures product next week.
While there have been some regards about trading futures on an unregulated asset such as bitcoin, Colas keen out that there is already state regulation of the wallets that put across the digital currency.
And he thinks larger regulation may be tricky since there is prejudiced in bitcoin all over the globe.
“You’d have to have one coordinated regulatory centre for the entire world financial system,” he said.
If that were to materialize, “then you probably don’t have much of an asset left, because that regulation make push down the price because it would lose some of its allure.”
There be enduring also been warnings that bitcoin is a bubble waiting to pop.
Anyhow, strategist Sam Stovall isn’t necessarily concerned about the effects on the overall Stock Exchange.
That’s because it is not like the tech bubble of 1999, when technology characterized a third of the S&P 500’s weighting, the chief investment strategist at CFRA explained “Closing Bell.”
“When we do have the increased volatility [in bitcoin] it pleasure probably end up being much more of a headline event than a bottom-line consequence, unless of course we find out that some masters of the universe, similar to long-term capital management, ended up getting a little too speculative,” Stovall translated.