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This is exactly what's happening to Bitcoin's prices. Investors are expecting that Bitcoin's prices will shoot up, and the only reason why the cryptocurrency costs thousands of dollars today is because people think it's valuable. However, despite the many controversies and naysayers that are against Bitcoin, one thing that's undeniably happening is that investors are getting more options for exposure to it. The cryptocurrency is helping the market evolve by changing the way people can speculate and hold cryptocurrencies. Options For one, it’s now possible to trade Bitcoin options. Although, trading Bitcoin options are not for the faint-hearted as they are expensive and as volatile as Bitcoin. Bitcoin options are just like any other options where investors pay a mark up for the right to buy or sell a fixed amount of Bitcoins on an agreed timeline. Currently, they are pricey because of "implied volatility". As the sentiment towards implied volatility goes up, so will the prices of the options. Investopedia provided a good example of Bitcoin options with high implied volatility. Based on the graph, a June 30 expiry shows a high implied volatility that varies from 90% to 200%. The demand for options has allowed Bitcoin to help the financial markets evolve, especially when the Chicago Mercantile Exchange (CME) announced its plan to launch Bitcoin futures in the last quarter of 2017. The increase in client interest in the evolving cryptocurrency industry led CME to introduce Bitcoin futures contracts. The number of investment vehicles that tap into the potential of Bitcoin is predicted to expand as the popularity of the cryptocurrency industry rises. Although being new to the investment world, Bitcoin options trading is now available in multiple countries. Bitcoin ATMs Bitcoin ATMs can now be accessed throughout the world. Bitcoin ATMs are being introduced in low-income areas, as well as places where banks are limited. Coinwire states that in the state of Detroit, there are about 30 ATMs, with more being strategically placed on the outskirts of Metro Detroit. Highland Park, Hamtramck, Pontiac, and Taylor are some of the low-income areas in Michigan where Bitcoin ATMs are being installed. There are no clear connections whether or not Bitcoin ATMs affected the cryptocurrency's spot prices, although it gave operators the opportunity to use a different financial model. CBS News specified that Bitcoin ATMs charge a percentage fee, as opposed to a flat fee in regular ATMs. Currently, Bitcoin ATMs collect a fee of about 9%, and if these machines become popular and widely accepted, its effect on the future of the cryptocurrency market is predicted to be massive. As more people feel comfortable with the conveniences that the machines offer, the more popular Bitcoin will become in terms of everyday use and merchant adoption. Blockchain Technology Despite Bitcoin's naysayers, blockchain – the framework that powers Bitcoin transactions – is one of the driving factors fueling the cryptocurrency industry's success. Some major organizations including IBM, Walmart, and Starbucks, all of which have no Bitcoin holdings, believe in blockchain's potential to improve payment systems and operations for merchants. With backing from globally recognized brands, the blockchain framework will continuously play a key part in Bitcoin's future success. In fact, the mere mention of the word blockchain opens doors to both fledgling and existing companies. Riot Blockchain Inc. saw a 20% increase in stock prices when it changed its name and dedicated its operations to blockchain research. Initial Coin Offerings (ICOs) that also dedicate their operations to blockchain's improvement are finding it easy to get funding from companies that believe in blockchain's potential to change the landscape of online financial payment systems.
The greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price. – Wikipedia A monkey business? A long long time ago, there was this bustling village, on a beautiful Caribbean island. Sure it was far away from the mainlands, away from most of the action, but it still had decent burger joints, coffee cafes not owned by global chains, and you could get tasty homebrew beers in its rough-and-tumble bars. In short, life was simple, yet great. What’s more, it’s got one big claim to fame: The place was well-known for its boatloads of monkeys. Enough monkeys to make them a commodity as common as wheat. One day, a merchant came to the village. He found an abandoned building — it would take capital to fix, but the walls were firm and the roof only needed a patch. Gutted and redone it, he made it his place. Anyway, he then posted an announcement. “Buying monkeys. $50 each.” The news left the villagers flabbergasted. Why would he want those useless monkeys? What is he thinking? Of course, some villagers still caught the monkeys and sold them to the merchant for $50 each. A few days later, the merchant announced that he would buy the monkeys at $100 each. So the villagers — and even more villagers — caught more monkeys and sold them to the merchant. And when the merchant announced that he would buy the monkeys at $200 each, the villagers went out of control. Day in, day out, they cared for nothing else but catching monkeys. Every monkey was a jackpot win. Until there were almost no more monkeys to be found on the island. The villagers wondered if there would be another announcement. They expected there would be. And it came. “I will be heading back to my hometown for a week,” the merchant declared. “And when I return, I will buy every monkey at $1000 each.” And an employee was tasked to look after the monkeys he had bought. With that, the merchant went home. But there’s one hitch. There weren’t any more stray monkeys left to be caught. The villagers were dumbfounded. At a loss. Then exasperated. That was, of course, until the merchant’s employee proposed to sell the villages some monkeys at $700 each, secretly. Not exactly what they needed. But nonetheless, reasonable it seemed. A tidy profit of $300 with each monkey sold at $1000. Deal. This news spread through the village like wildfire. Everyone wanted a piece of the pie. The wealthy bought the monkeys in big lots. The poor borrowed all the money they could to buy the monkeys. The monkeys were sold out within a day. Then it happened. The night was warm. The skies threatened rain but never opened. The villagers were gathered at the merchant’s house. They felt pumped, excited. Every fibre of their being was vibrating with anticipation. This was the moment. Any minute now the merchant would pull up, with fat wads of cash in his hands, ready to proceed with the promised deal. A month passed. The merchant didn’t appear. And his employee had disappeared. The villagers were left with nothing. Nothing, but monkeys. Useless monkeys that they had bought for $700 each. Does it remind you the infamous 17th-century speculative bubble, “Tulip Mania”? We know very little what drives the bitcoin’s price. Except an expectation of more price appreciation. It is valuable because people think it is valuable. Just like the monkeys. Each bubble is the next monkey business. It will make a lot of people bankrupt and a few people filthy rich in this monkey business. That’s how it will work. Buyer beware. "I can calculate the movement of the stars, but not the madness of men". -Isaac Neuton “The four most dangerous words in investing are, it’s different this time.”