The advertisement on the London Underground this summer told the story. Next to a map of the Metropolitan Line and a sales pitch for a herbal remedy for stress was a solicitation for an investment fund giving punters a chance to bet on bitcoin and other cryptocurrencies. “Crypto needn’t be cryptic,” it informed commuters.
The mass-market campaign made sense because bitcoin — a digital currency created by geeks that very few people understand — has become the investment nearly everyone is talking about. Worth little more than $300 at the start of 2015, the price of one bitcoin rocketed past the $10,000 mark and then $11,000 this week before settling around $10,550 on Friday in roller-coaster trading that tested the capacity of dealing platforms in the nascent asset class and stoked fears of a bubble. The dramatic price action — at a time of low volatility in stocks and bonds — has proved impossible for the financial world to ignore. Nasdaq, the US exchanges operator, said on Wednesday it planned to launch bitcoin futures contracts next year, which would make it easier for investors to profit from losses as well as gains in the cryptocurrency.
The move followed similar decisions by rivals Chicago Mercantile Exchange and Chicago Board Options Exchange. Big banks that serve as intermediaries in such markets — enabling them to make money from price swings in either direction — have considered joining the futures trade, despite doubts about the underlying product both as a store of value or a means of payment. JPMorgan Chase — headed by Jamie Dimon, who has called bitcoin a “fraud” — is thinking about helping clients trade bitcoin futures, according to a person familiar with the matter.
Goldman Sachs said it is exploring a similar market-making role, in response to client demand. “It’s not for me, but there’s a lot of things that weren’t for me in the past that worked out very well,” Lloyd Blankfein, Goldman’s chief executive, said this week. “Based on everything I know, I’m not guessing that it will work out. But I can’t say . . . it’s a fraud, it can’t [work out], because it might.” The prominence of bitcoin marks an unlikely outcome for a product born in 2009 as an open-source computing project inspired by the mysterious Satoshi Nakamoto. That was the name used by the person or people who wrote the paper describing the digital currency. No one has been able to establish whether there really is a Mr Nakamoto.
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