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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Bitcoin surges over $15,000 despite 'Dante's Inferno' warning – as it happened

The offices of the bank “La Maison du Bitcoin” in Paris this week.
The offices of the bank “La Maison du Bitcoin” in Paris this week. Photograph: Chesnot/Getty Images

Closing summary: Bitcoin booms again

A man feeds money into a Bitcoin ATM at the Bitcoin Center NYC in New York.
A man feeds money into a Bitcoin ATM in New York. Photograph: Brendan McDermid/Reuters

Time to recap:

It’s been another riproaring day for bitcoin, as the cryprocurrency surged to new all-time highs.

Starting the day at $13,600, bitcoin smashed through $14,000 for the first time ever in early European trading. By 9am in New York, it was surging through $15,000.

Bitcoin
Bitcoin Photograph: Thomson Reuters

In increasing frenzied trading, bitcoin then hit $19,000 on the coindesk exchange (although Reuters never clocked it above $15,995).

It then subsided, as bitcoin exchanges admitted they were struggling to keep up with the huge trading volumes.

At today’s prices, the total value of every bitcoin in the world is roughly equal to the market capitalisation of credit card firm Visa.

The surge came despite fresh warnings that bitcoin could be a bubble.

Sir Howard Davies, chair of Royal Bank of Scotland, said top central banks should cite Dante’s famous warning from the gates of hell - ‘Abandon hope all ye who enter here’.

In the last 12 months, bitcoin has now gained around 2,000%. It’s gone from $11,000 to over $15,000 this week alone, amid signs that retail investors are piling in.

Bitcoin is due to enter the mainstream next week, when clearing houses begin offering futures trading. But, several US banks are reluctant to take part, according to the Wall Street Journal.

Analysts are split over whether futures trading will bring some calm to bitcoin. It could push the price down, as investors will be able to bet on a crash. But if money keeps pouring in, the price could head higher....

But investors were also reminded of the dangers of cybercrime, as a bitcoin wallet firm revealed it had been hacked.

That’s all for today. Thanks for reading and commenting, GW

Updated

Wall Street has just closed for the day, with small gains on the main indices.

The Dow gained 70 points, or 0.3% - a performance matched by the S&P 500. The tech-focused Nasdaq rose by 0.5%, partly thanks to Alphabet (Google) and Facebook.

Mark Hamrick,Washington bureau chief for Bankrate.com, reports that some investors aren’t happy about missing out on bitcoin:

A customer uses a Bitcoin machine in Piccadilly Circus in London today.
A customer uses a Bitcoin machine in Piccadilly Circus in London today. Photograph: Rick Findler/PA

US banks wary of bitcoin futures

Two major US banks have decided not to offer bitcoin futures trading when it launches this weekend.

That follows concerns (covered in this blog earlier today) that the systems aren’t robust enough.

That’s according to the Wall Street Journal, which reports:

Bank of America Merrill Lynch and Citigroup Inc. are telling customers that they won’t offer them access to the first bitcoin futures market when it goes live on Sunday, people familiar with the matter said.

Goldman Sachs Group Inc., the largest U.S. futures broker, will offer access but only for certain customers, a person familiar with the situation said. ABN Amro Group will be handling trades for “a small selected group of professional clients,” a spokeswoman for the Dutch bank said in an e-mail. Morgan Stanley and Société Générale SA are still evaluating their approach to bitcoin futures, other people said Thursday.

CNN’s Seth Fiegerman joined the bitcoin party last week, when he invested $100 in the digital currency.

He’s now written a handy explainer - here’s a flavour:

Bitcoin exchanges have a checkered history. Mt.Gox, once the largest exchange, shut down in 2014 after losing hundreds of millions of dollars worth of bitcoin after a hack.

Today, the leading exchange is offered by Coinbase, a startup that has raised more than $200 million from a number of top tier venture capital firms. Square (SQ), the payments service, is also rolling out a bitcoin product.

There are also bitcoin ATMs in scattered bodegas and convenience stores around the country, through companies like Coinsource. The ATMs let you exchange bitcoin for cash, or vice versa by scanning a QR code from the digital wallet application on your phone.

With Coinbase, you must first give the app permission to connect to your bank account. As with other stock trading applications, you pay a small fee for each transaction, buying and selling. But the transaction can take significantly longer.

My original $100 bitcoin purchase won’t officially be completed on Coinbase until Friday, more than a week after the transaction. The price I bought it at remains the same, but I won’t be able to sell at the earliest until Friday.

If the price plummets before then, I’m out of luck.

However, Mrs Fiegerman isn’t impressed (and this is after the price went up!)

City investor Justin Urquhart Stewart reports that his cabbie is interested in bitcoin....

Borrowing money to buy into a rising asset... that’s one of the classic signs of a bubble, associated with the dreaded Minsky Moment (when prices suddenly collapse as speculators can’t service their loans)

Right now, bitcoin is trading at $15,300, according to the ‘spot price’ on my Reuters terminal.

That’s a gain of 12% today, and up over 40% since the start of the week

Earlier it jumped to the brink of $16,000 (Reuters’ data shows) but was seen rather higher on some other exchanges.

Some bitcoin exchanges are struggling to handle the interest today, it seems.

Coinbase, the largest US bitcoin, blamed ‘record high traffic’ for technical problems:

Bitcoin wallet provider Trezor had a similar story:

This may not reassure critics who wonder how the bitcoin ecosystem will cope with the next price correction.....

Ian Guider of Ireland’s Sunday Business Post spies a bubble...

Speaking of volatile trading, bitcoin prices on the coinbase exchange just rocketed towards $20,000.

But it swiftly slumped back to less stratospheric levels.

What wild times!

The bitcoin price has been particularly volatile today, as it struck a series of new highs:

It won’t be easy to run a future market in such a volatile asset.....

Economics professor Justin Wolfers has put his finger on the problem with bitcoin pricing - it’s hard to bet against it today.

The launch of bitcoin futures markets on Sunday night will be an important moment, says Neil Wilson of City firm ETX.

But he doesn’t agree that letting traders bet against bitcoin necessarily means its price will fall.

Wilson explains:

At least with regulated futures the market ought to behave more normally than it has done – notwithstanding some pretty major spasms in the market that are likely on Sunday night and Monday morning as the contracts launch - and this would be net bearish for Bitcoin overall as it will allow proper shorting and hedging strategies.

At present the only way to short is to sell your bitcoin and exit the market, a bias that favours bulls. The ability to go short creates a new dynamic in the market and may result in a significant shock to prices. The problem is anyone shorting against this headwind of rapidly rising prices needs to be able to sweat out huge potential upside. As plenty before have noted, Bitcoin might keep rising longer than shorts can stay solvent.”

Our bitcoin story

If you’re just tuning in, here’s our news story on Bitcoin’s rally, and the concerns building about it.....

Bitcoin has been likened to Dante’s Inferno by the chairman of Royal Bank of Scotland. As the digital currency surged above $15,000 on Thursday, Sir Howard Davies suggested it should carry a similarly apocalyptic warning for investors.

Davies, a former head of the UK’s top financial watchdog, called on the Bank of England and other authorities around the world to launch a coordinated warning against the digital currency.

Bitcoin has increased in value by $3,500 in the space of a week, after surging more than 900% this year. It was trading at $15,300 at lunchtime on Thursday.

“Put up the sign from Dante’s Inferno – ‘Abandon hope all ye who enter here’ – I think that’s probably what’s needed,” he said speaking on Bloomberg TV, adding that the cryptocurrency appeared to be a “frothy investment bubble”.

Davies argued for Threadneedle Street to take action at the same time as the US Federal Reserve, Securities and Exchange Commission, and the European Central Bank. “Central banks are very anxious about it [bitcoin],” he said....

More here:

Analyst Charlie Bilello of Pension Partners points out that bitcoin usage isn’t keeping pace with its price:

A majority of City investors think that bitcoin is an unsustainable bubble.

That’s according to a survey of institutional investors, conducted by Natixis Investment Managers, which found:

Institutional investors may believe bubbles have formed in both the bond (42%) and stock (30%) markets, but concerns for these traditional assets pale in comparison to the 64% who say there’s a bubble in Bitcoins.

Bubbles are the number two worry for City investors, after geopolitical dangers
Bubbles are the number two worry for City investors, after geopolitical dangers Photograph: Natixis

Over on FT Alphaville, Izabella Kaminska has a fascinating theory to explain bitcoin’s rise.

In short, it’s that certain investors have piled into bitcoin, driving its price every higher, because they plan to ‘short’ it next week. Shorting becomes a serious option once the CME clearing house launches its derivatives contracts next week.

So if you’ve invested the time and money to stock up on bitcoin this year, you could make immense profits if you short the cryptocurrency next week.

She explains:

Without the certainty of a properly regulated marketplace defending the futures side of the equation, a payoff cannot be guaranteed. It’s why the arbitrage exists in the first place: the trade cannot be exercised elsewhere in the bitcoin ecosystem because the risk of counterparty default at the first sign of distress is far too great. You’d win the trade, but you’d probably lose the payout.

If a regulated futures market takes that risk away, however, the trade becomes a no-brainer if not a mastermind opportunity.

Which is arguably where we are now.

This chart shows how the plan would play out:

The bitcoin price
The bitcoin price Photograph: Alphaville

But.... such a plan could still go wrong. For example:

  1. The futures launch is suspended unexpectedly, perhaps due to regulatory concerns or industry pushback?
  2. The anticipated futures demand never arrives because the margin costs of holding open long positions proves to be too great and/or liquidity is so shoddy nobody can trade effectively.
  3. The cash settled return on the futures leg, won’t necessarily be matched by the price achieved on the physical liquidation.

More here: The smartest bitcoin trade in town?

Wowzers! Bitcoin has now surged to $16,000 on one exchange:

That means it’s gained more than $3,000 since yesterday morning.

In any bubble, there’s a moment when new investors are lured in by reports of hefty profits, helping to drive the price higher and higher.

Is that where we are now with bitcoin? And how much higher will it go?

Craig Erlam of foreign exchange firm OANDA predict a correction is looming....

The cryptocurrency has undoubtedly come on leaps and bounds this year but it’s difficult to see anything move as Bitcoin has and not fear a devastating bubble bursting. I don’t think it’s a coincidence that Bitcoin has been making headlines over the last week or so, during which time it’s risen another $5,000, or 50%.

If speculation is playing as big a role in the latest moves as some expect, then very interesting times may lie ahead. Although as is always the case, this could rise a lot more before the bubble bursts.

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So, where are all these people who have made fortunes out of bitcoin?

The Daily Telegraph have found one - and he’s still just a teenager. They say:

Eddy Zillan was 16 when he began investing in bitcoin, just two years later, the youthful investor estimates he has “made close to a million” from trading in various cryptocurrency.

The perspicacious Ohio teenager was an early adopter of the bubble and bust digital currency, investing in 2015 when bitcoin’s price was as low as $214 following a prolonged bear market.

“I started off with $1,000 to play around with out of my savings,” he told The Telegraph. “I then acquired another $5,000 through my bar mitzvah money (in 2012).

“I then invested another $6,000 through money I earned and saved from working summer jobs.”...

Here’s a useful non-technical explanation of bitcoin:

Anyone who bought bitcoin two weeks ago (when it was trading at $8,000) has almost doubled their money.

They won’t give you that at your local bank! But, of course, that’s exactly why some experts fear that a speculative bubble is building.

The bitcoin price
The bitcoin price Photograph: Thomson Reuters

Bitcoin buyers aren’t heeding Sir Howard Davies’s warning.

The cryptocurrency just hit a new alltime high, at $15,200, as American traders arrive at their desks.

Just in: The US jobs market remained strong last week.

Just 236,000 Americans filed new claims for unemployment benefit during the seven days to 2nd December. That’s down from 238,000 the previous week, and the third weekly decline in a row.

Yann Quelenn of Swissbank believes bitcoin will keep climbing this month, perhaps even hitting $20,000 -- before suffering an abrupt reversal.

Quelenn writes:

Sheer greed is driving the cryptocurrency higher, perhaps to $20,000 per coin by Christmas. This would put Bitcoin’s market cap above $300bn, one third that of Apple! Bitcoin is unique in history, true, but a correction will likely be very tough.

Two Chicago exchanges, the CBOE and the CME, will soon launch trading of cryptocurrency futures. This signals an impending stampede of institutional investors – many speculators, some hedgers. Just watch the fireworks fly.

Sir Howard Davies’s hint that bitcoin is a hellish investment for the unwary is somewhat ironic, given the track record of the bank he chairs.

Royal Bank of Scotland has been controlled by the UK taxpayer for nearly a decade, having been bailed out after nearly collapsing after the failure of Lehman Brothers.

It has made a steady stream of losses ever since, and the British government is now planning to crystallise a £26m loss when it sells its RBS shares over the next few years.

Davies can’t be blame for RBS’s plight, as he only joined in 2015. But the legacy of the financial crisis is exactly why some people believe cryptocurrencies make a lots of sense.

UK hit as GE axes 12,000 jobs

A worker at GE’s Alstom power plant turbine in Rugby.
A worker at GE’s Alstom power plant turbine in Rugby. Photograph: Bloomberg/Bloomberg via Getty Images

Workers at GE Power have just had a very nasty shock. The US company is axing 12,000 jobs across the globe in a cost-cutting drive.

The move includes 1,100 workers at its UK operations, mainly in Stafford and Rugby.

GE blamed falling demand for fossil fuel power plants, saying:

“Traditional power markets including gas and coal have softened”.

Jerry Yang, the co-founder of Yahoo!, is more optimistic about bitcoin’s future.

Yang reckons digital currencies can be a force for good in the long term.

The key it to treat bitcoin as an actual currency, not an asset whose price has been driven up by speculation.

As Yang put it to CNBC:

“Bitcoin as a digital currency is not quite there yet.

Personally, I am a believer in how digital currency can play a role in our society… but for now, it seems like it’s more driven by the hype of investing and getting a return rather than using it as a transaction currency.

The FT points out that Bitcoin has hit $15,000 on some crypto-exchanges.

Look at that spread of prices, though! No wonder the US banks have concerns about bitcoin derivatives contracts hitting the markets......

RBS chair: Abandon hope, all ye who enter bitcoin

Sir Howard Davies, the chairman of Royal Bank of Scotland, has issued a dire warning against investing in bitcoin.

Speaking on Bloomberg TV, as bitcoin headed towards $15,000, Davies warned that the digital currency looked like a “frothy investment bubble”.

A logarithmic chart of Bitcoin’s accelerating price
A logarithmic chart of Bitcoin’s accelerating price Photograph: Bloomberg TV

He’s concerned that bitcoin doesn’t really fall under any one regulator’s remit, meaning the adults in the room aren’t warning of the risks.

Davies says it’s hard to see any ‘rational reason’ for bitcoin’s recent surge:

All the authorities can do is put up the sign from Dante’s Inferno - ‘Abandon hope all ye who enter here’.

That’s what’s needed, and it need to done by the Federal Reserve, the SEC, and the Bank of England and the European Central Bank at the same time.

So why aren’t the world’s top central bankers acting?

Davies suspects they’re worried about being seen as luddites if they criticise digital currencies, adding:

The market is telling us something about the need for new faster payments systems. [But] I personally don’t think it’s bitcoin in the long run.

But should bitcoin actually be outlawed, as economist Joseph Stiglitz argues?

No, replies Davies - if you ban bitcoin, other variants will simply take its place.

Updated

Here’s our story about the problems at NiceHash:

The pound’s volatility has hit its highest level in almost six months, as Brexit headines shunt sterling around:

Bitcoin mining service hacked

The old mantra Caveat Emptor goes without saying where bitcoin is concerned.

Not only is its value uncertain (‘higher than yesterday’ won’t be true forever), but you run the risk of losing your bitcoins to a cybercriminal.

Overnight, Slovenian-based bitcoin miner NiceHash says it is investigating a security breach and the possible theft of tens of millions of dollars’ worth of bitcoins.

It’s a blow to bitcoin miners who had contributed their computing power to mine bitcoins through NiceHash. Users reckon that NiceHash’s bitcoin wallet had held around 4,736.42 bitcoins — equivalent to over $66m at current prices.

Here’s the official statement:

NiceHash: We've been hacked

Updated

More reaction to Bitcoin’s latest spike:

Fiona Cincotta, senior market analyst at City Index, says Bitcoin’s rise looks unstoppable -- but the launch of those bitcoin futures could change things.

Bitcoin bulls have driven the virtual currency beyond $14,500 for the first time. The bitcoin has jumped 20% over the last 24 hours with buyers of the virtual currency now eyeing up $20,000.

Given the fact that both the CBOE and the CME exchanges will begin offering bitcoin futures this month, perhaps the prediction of $20,000 is not that far off? However, the start of futures trading also means the start of short trades on the bitcoin, which could increase volatility further.

FT: Big banks push back on launch of bitcoin futures

A bitcoin logo.

Now this is interesting.

The Financial Times is reporting that some of the world’s largest banks are resisting the imminent launch of bitcoin futures.

Futures trading will allow people to trade the digital currency without actually owning it. It’s means to open bitcoin up to a wider range of investors.

However, given bitcoin’s volatility, some industry figures fear that the clearing houses that underpins the markets could suffer massive losses if the cryptocurrency were to crash.

The FT says:

The world’s largest banks are pushing back on the introduction of bitcoin futures, raising concerns with US regulators that the financial system is ill-prepared for the launch of the contracts as the value of the volatile cryptocurrency has soared.

Institutional investors have been keen to trade the asset but only via a regulated market. However, the planned launch in the next 10 days of futures contracts by the Chicago exchanges CME Group and CBOE Global Markets, given a green light from the Commodity Futures Trading Commission last week, has prompted a backlash among the major brokers who backstop trading across the industry.

The Futures Industry Association, the main futures industry lobby group, plans to send a letter to the CFTC that will be published on Thursday. In a draft seen by the FT, the FIA writes that the rapid introduction of bitcoin futures “did not allow for proper public transparency and input”.

A London residential street.

Newsflash: UK house prices kept rising last month, according to the latest data from Halifax bank.

Halifax reports that prices rose by 0.5% during November, leaving them 3.9% higher than a year ago.

Jonathan Samuels, CEO of the property lender, Octane Capital, says the Bank of England’s (well-flagged) interest rate hike last month hasn’t spooked buyers:

“The improved performance of the market in the latest quarter suggests the first interest rate rise in a decade may have ignited demand.

“On this evidence, the November rate rise has brought prospective buyers out into the open rather than sent them underground.

“Many buyers may have come to the conclusion that it is better to move now while mortgage rates are still low than further down the line when they could be less competitive.

Currency traders may need to don their tin hats in the coming days, as the Brexit negotiations intensify.

Lee Wild, head of equity strategy at interactive investor, predicts plenty of volatility:

“Europe is the only show in town right now, and ongoing speculation around a solution to the Irish border issue has further dampened enthusiasm for sterling. A deal must be done by close of play Friday if Brexit talks are to move onto trade after next week’s summit.

Reality is, deadlines will likely get extended, whisper from Brussels will raise and dash expectations, and we may or may not get anything at the end of it. Prepare for a volatile couple of days on the currency markets.

Merger news: GVC, the gambling giant behind Foxy Bingo and PartyCasino, is in talks over a £3.9bn takeover of Ladbrokes.

Shares in both companies have jumped in early trading (Ladbrokes surged by over 25%).

Ladbrokes and GVC’s share price

If successful, it would create one of the world’s largest betting firms.

Ladbrokes could welcome a takeover, given the mounting criticism over its fixed-odds betting terminals (savaged as being ‘crack cocaine’ of gambling).

The final value of the deal will partly depend on the government’s clampdown on FOBT, which could take a chunk out of Ladbrokes profits.

Updated

Geopolitical issues are high on the market’s agenda today, says Marc Ostwald of ADM Investor Services:

Politics will again be to the fore as UK government attempts to find some compromise on the hypersensitive issue of the Irish border, while the fall-out from Trump’s decision to recognise Jerusalem as Israel’s capital threatens to escalate already enormous tensions across the Middle East, and quite obviously contradicts UN resolution 478.

Bitcoin's surge accelerates

Last night’s price surge was remarkable, even by bitcoin’s recent standards:

The agenda: Brexit weighs on the pound

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The pound is under pressure this morning as traders worry that Britain may not get a Brexit breakthrough before Christmas.

Sterling dipped overnight to $1.337 against the US dollar, with no immediate sign of an end to the deadlock over the Irish border question. That’s almost two cents lower than Monday, when optimism of a deal was rising.

It’s also a little weaker against the euro, at €1.133.

Tensions mounted after Michel Barnier, the EU’s chief Brexit negotiator, said the UK must agree the text on a potential deal by Friday night. Otherwise, the two sides can’t shift onto taking about that precious trade deal.

Time is running short, as analysts at FxPro warn this morning....

If talks do not move on to the next stage of discussions in December then the terms of a transition period will likely be pushed back until the next European council summit of leaders in March, by which time many businesses in the UK will have had to make decisions over their location and investments in the country.

So, the City is looking to Westminster for some serious progress between the UK government, the DUP (it’s Northern Irish partners) and Dublin.

But if each side sticks to its principles, this will be tough - so sterling could have a choppy ride.

Bitcoin, meanwhile, continues to soar at an ever faster rate. The digital currency battered its way through the $14,000 mark overnight, having hit $12,000 yesterday.

More consumers are jumping into bitcoin - presumably having heard stories of its rapid ascent. Institutional investors are also taking more interest, as they’ll soon be able to buy and sell bitcoin derivative contracts.

It will intensify the argument between those who think bitcoin is a monetary paradigm shift, and those who see a dangerous bubble.

Par example:

We’ll also be watching out for new UK house price figures, updated eurozone growth stats and the weekly US unemployment report:

The agenda

  • 8.30am GMT: Halifax UK house price survey for November
  • 10am GMT: Eurozone GDP statistics for Q3 2016 (second estimate)
  • 1.30pm GMT: US weekly jobless claims
  • 4pm GMT: European Central Bank president Mario Draghi speaks at a press conference held by the Bank for International Settlement.

Updated

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