The aggregate value of all cryptocurrencies hit a record high of about $184 billion (€158 billion) on Wednesday, according to industry website Coinmarketcap, making their reported market value worth around the same as that of Goldman Sachs and Morgan Stanley combined.
The new peak came as the biggest and best-known cryptocurrency, bitcoin, hit a record high of more than $6,500 (€5,590). That took its own “market cap” – its price multiplied by the number of coins that have been released into circulation – to a record high just shy of $110 billion (€94.6 billion).
The latest surge in bitcoin – which has seen an eye-watering increase of almost 800 per cent in the past 12 months – was driven by news on Tuesday that CME Group, the world's largest derivative exchange operator, would launch bitcoin futures in the fourth quarter of the year.
The announcement was seen as a major step in the digital currency’s path toward legitimacy and mainstream financial adoption.
The second-most valuable cryptocurrency Ether – sometimes known as “Ethereum”, after the project behind it – was trading slightly down on the day at $302 (€260) per coin, having hit a record high of more than $410 (€353) in June.
The surge in value comes as CME Group, the world’s largest exchange operator by market value, is preparing plans to offer futures on bitcoin, the latest sign that cryptocurrencies are moving away from the fringes of finance.
Traceability
The Chicago-based trading venue said it intended to add bitcoin to its stable of futures on interest rates, stock indices, commodities and currencies by the end of the year.
Bitcoin, the biggest cryptocurrency, is controlled by computer algorithms rather than central banks, unlike mainstream currencies. Advocates applaud its traceability but critics say it is an avenue for money laundering and fraud.
The price of bitcoin has exploded by 570 per cent this year, luring traders bored by the lack of volatility across other markets. Hedge funds, family investment offices and proprietary trading companies are dipping their toes into cryptocurrency markets now worth more than $180 billion (€155 billion), while banks and traditional asset managers have mostly steered clear.
A lack of futures contracts has made it difficult to hedge exposure to bitcoin's wild fluctuations. Terry Duffy, CME chief executive, said the exchange made its move "given increasing client interest" in cryptocurrency markets.
Competition
The gambit puts CME in competition with Cboe Global Markets, a Chicago-based exchange operator, which announced plans in August to launch derivatives on bitcoin late this year or early next. Both CME's and Cboe's contracts need approval from the US Commodity Futures Trading Commission. It declared virtual currencies a "commodity" in 2015, enabling it to police futures contracts based on them. The agency recently warned that unregistered cash bitcoin markets are susceptible to "Ponzi schemers" and "fraudsters".
Jamie Dimon, the JPMorgan Chase chief executive, called bitcoin a "fraud" last month, used mostly by murderers, drug dealers and other miscreants.
Larry Fink, head of BlackRock, the biggest asset manager, said bitcoin was an "index of money laundering".
The warnings have not dissuaded traders. Bobby Cho, head of OTC trading at Chicago-based Cumberland, the leading cryptocurrencies market maker, said the announcement "potentially accelerates the pace of involvement of more traditional financial firms".
– (Copyright The Financial Times Limited 2017/Reuters)
