An enigma to the world since being introduced in 2009, Bitcoin is nonetheless growing and gaining more mainstream appeal in the Forex world month by month, 2014 was no exception. After topping out at $1,000 USD in January 2014, Bitcoin briefly dipped as low as the $260 mark on February 16, 2014 (more than a 70% decline peak to pit for the year, and making it one of the worst performing assets/currency had you acquired bitcoin to start the year at the price of $814 on January 1st, 2014).
From its bottom price of the year, the crypto/digital currency slowly recovered its losses and relative stability as institutional firms such as Bloomberg started to integrate the digital currency within its financial platforms. In addition, regulatory agencies started to come out with clearer stances towards digital currency law providing backers much needed boosts of confidence.
While never recovering the $1,000 handle for the rest of 2014, Bitcoin climbed upward through $600 dollar levels through the summer months. However, its eventual slow decline in the wake of an overall strong dollar really leads us to where we stand today to close the year at roughly $300ish USD to 1 Bitcoin. We highlight and review below Bitcoin developments for the year as it concerns retail and institutional markets.
It is safe to say the Forex world, from regulators to everyday traders are still trying to make sense of the digital currency phenomenon. Are Bitcoins and other digital currencies the future like many predict…destined to claim its place in foreign exchange and as a means of global mainstream payment or is it a passing fad and hobbyist unit of value?
2014 Bitcoin FX Review:
In January and February, speculation regarding of one of the biggest Bitcoin exchanges became true as Mt Gox filed for bankruptcy. This was one of the reasons for the massive decline and sell-off from $1,000 as the exchange business is a crucial component of being able to swap the digital currency into central bank backed paper , a major pillar of confidence in the Bitcoin ecosystem. A positive coming out of the closure of Mt Gox was regulators began to take notice and 1st world financial authorities were apt for regulation of these exchanges. Furthermore, those Forex brokers who offered Bitcoin trading scrambled to find reliable price feeds for their offering as huge price divergences were seen between different exchanges in the wake of the Mt Gox bankruptcy.
In March, financial platform provider PFSOFT, maker of the Protrader multi-asset trading platform, introduced a new product called Protrader Exchange Solution. Protrader Exchange Solution is an end-to-end commercial exchange solution available for crypto-currency and derivative trading. The new offering provides all the needed components to launch and manage a crypto-currency exchange. Also in March, the Monetary Authority of Singapore set forth its regulatory stance on virtual currency intermediaries, hinting at the nation’s acceptance of Bitcoin as a viable tender. Singapore, being a huge Forex hub could play a leading role in the Asia-Pacific region for future Bitcoin and digital currency regulation.
To finish March we saw institutional minds step up as Tera Group, the holding company behind Tera Exchange issue documentation for a 25-day Bitcoin swap transaction between a pair of U.S. financial firms. The swap works by allowing the holder, say a vendor who accepts bitcoin as a method of payment, to protect against a potential drop in the virtual currency’s value against the U.S. dollar. Tera Exchange, is now the first and only U.S. regulated trading platform for bitcoin swap contracts. Moreover, regulated by the CFTC, the firm’s Tera Bitcoin Price Index is the only regulated global benchmark for USD/XBT contracts and has since become a popular price feed for many brokers offering speculation on Bitcoin prices.
April began with xCFD, an online CFD broker announce it had started accepting Bitcoin deposits. Through a partnership with BIPS, a global Danish Bitcoin Payment solution provider, the firm enabled retail traders to utilize their Bitcoin assets in multiple markets such as equities, commodities and FX, with 0% commission on transactions. The New Zealand-based broker has been offering trading in Bitcoin CFDs since September 2013.
Ivan Kuznetcov, Marketing Director of xCFD said: “The Bitcoin market has been developing rapidly over the past few years, and we believe that expanding our offering will create new opportunities for the virtual currency as a trusted payment method as well as an investment tool.”
April wrapped up by seeing Atlas ATS, a secure, state-of-the-art exchange platform built by Wall Street veterans for trading digital currencies partner with the National Stock Exchange, which is a small venue serving North America and overseas, and as a subsidiary of CBOE Holdings (NASDAQ:CBOE) regulated by the Securities and Exchange Commission (SEC) for a future bitcoin exchange. Then finally, Bloomberg, stated to end April that the company plans to list bitcoin prices on its financial data terminals, a move that would give the volatile digital currency a stamp of respectability and spark interest in U.S.-based trading platforms.
While certain nations such as China and Thailand have attempted to ban its use entirely, with little effect. To begin May, we saw the United States now begin to investigate the possibility of implementing a set of rulings relating to Bitcoin, with a task force of U.S. state regulators having commenced work on the first bitcoin rule-book. As June began and summer dawned, we witnessed, BTC-e, a popular digital currency exchange now offer MT4 trading accounts denominated in Bitcoin, Litecoin, Namecoin. June witnessed the growing trend of Bitcoin ATMs popping up around the globe continue as Israel became the first country to get a Bitcoin ATM in Middle East which is cash out capable, in this case being able to swap Bitcoin for Shekel on the spot. Even conservative Switzerland showed it was on the cutting edge of the digital currency trend when Switzerland’s FINMA granted the first Bitcoin trading license to SBEX, deeming Bitcoin as a means of payment, with the Swiss on-board it is was hard to deny seemingly growing Bitcoin legitimacy.
Indeed, with the launch of SBEX in Switzerland and the anticipated proliferation of Bitcoin ATMs in what is widely considered the world’s most secure financial markets economy, you would think this was a key stamp of approval among other political entities. This turned out not to be the case as the supranational EU went against the Swiss by denouncing the use of Bitcoin within financial institutions in Europe. In July, The European Commission saw fit to take action following the European Banking Authority’s statement that banks should not buy, hold or sell virtual currencies until regulators develop safeguards to protect their integrity. The EU, to its credit has a much harder job regulating something such as Bitcoin due to the complexity and size of the EU, while Switzerland could much easily act due to its highly developed and integrated financial sector and smaller uniform population.
Summer time stayed warm on the Bitcoin front as July and August saw the following developments:
- Xapo, a Bitcoin vault gained investment from series of venture capital funds, plans to utilize Bitcoin based debit cards.
- Netagio, a UK-based digital currency broker, announced the launch of the first and only British exchange enabling retail customers and institutional investors to trade gold, Bitcoins and GBP on a single peer-to-peer exchange platform.
- A new law proposed by New York State if implemented, would require all firms which transact in crypto currencies to hold a “BitLicense”, and be accountable to the New York State Department of Financial Services. This of course, provides a pathway for New York City to become a global bitcoin hub.
- 1st class bitcoin domain BTC.com sold for more than one million US dollars, as digital currency players invested larger amounts to acquire bitcoin properties.
- Coinsetter, NYC-based professional ECN forex trading platform for Bitcoin, announced the release of its institutional FIX API. With the announcement, Coinsetter become the very first bitcoin company to launch a FIX API.
As summer came and went, September saw much of the same advances as New Zealand digital currency platform, igot launched the first real-time bitcoin exchange for the UAE. Glancing back to North America, September reports saw Canadians put their faith in digital currency in a surprising development. Canadian payroll company Wagepoint, which began providing an option for salary payment in Bitcoin in 2013 expecting zero interest was surprised when just a few months into the project as 2014 went along, many employees started receiving their salaries in virtual currency.
Fall continued with regulatory news as Britain’s Chancellor of the Exchequer George Osborne said the UK will include Bitcoin regulation plans when he delivers the 2015 budget in March. Chancellor George Osborne seems planned to raise Britain’s stakes as a center for Bitcoin. Highlights from September conclude with WPCS, which specializes in contracting services for communications infrastructure and the development of digital currency trading platform BTX Trader announces 34% user growth for its digital currency platforms.
October saw Bitcoin exchange Coinsetter unveil its proprietary HTML5 mobile trading application, placing Bitcoin exchanges directly in line with mainstream retail FX firms in terms of platform offerings. October also saw the launch of new Australian bitcoin exchange called Independent Reserve which touted Australia’s favorable regulations. Rounding out the month, LedgerX, a company backed by Google Ventures and Lightspeed Venture Partners applied for registration with the US Commodity Futures Trading Commission as a swap execution facility and a derivatives clearing organization. LedgerX intends to initially list Bitcoin option contracts. LedgerX was started in 2014 by former Goldman Sachs high-frequency traders and Massachusetts Institute of Technology-educated computer scientists. Many believe that a United States regulated and based futures exchange for Bitcoin would settle down some of the volatility.
November, December highlights as Bitcoin heads into 2015
The United States’ only regulated binary option broker Nadex planned launch of Bitcoin binary options, which is now live. Likewise, Tradesmarter, a leading provider of binary options platform technology and B2B services announced binary options for Bitcoin is now available.
Rounding out the selected highlights, it is becoming increasingly apparent that seasoned and highly experienced senior executives with a background in some of the most esteemed financial institutions are beginning to take a leap of faith into supporting Bitcoin start-ups as Mr. Paul Camp who was former Managing Director and Global Head of JP Morgan Chase’s Transaction Services business joined Bitcoin startup firm Circle.
It’s evident that wider adoption was full steam ahead in 2014 just by reviewing the above highlights. A review is not enough to encompass the massive global enterprise taking place to integrate this new technology into the global FX and payment infrastructure. All of this organic growth taking place while people are still trying to make sense of the whole phenomenon is a fascinating thing. We saw from Bitcoin ATMs, XBT denominated trading platforms (Bitcoin exchanges have begun to start using the XBT notation but many merchants and mainstream quotes still use BTC), retail broker offerings on price speculation and injection of venture capital funds to bitcoin startups, it is quite clear that many would like to see the digital currency succeed for mainstream and institutional usage. 2014 and most likely 2015 will be known as years of pushing wider adoption, helped by VC money and Wall Street acceptance, while technology focused financial firms push the digital currency into the future creating a whole digital currency sub industry. 2014 and into 2015 should also be known for regulatory agencies starting to chime in with the birth of laws and regulations surrounding the digital currency framework. Make sure to stay tuned to LeapRate in 2015 as the Bitcoin and digital currency train rolls along.