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Laszlo Birinyi: Bitcoin Fever Is Drawing Investors Into Stock Market

Image: Laszlo Birinyi: Bitcoin Fever Is Drawing Investors Into Stock Market
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By    |   Tuesday, 19 December 2017 02:00 PM

Investment guru Laszlo Birinyi says that regardless of your personal opinion of bitcoin, the controversial digital currency does have one undeniable redeeming factor: It is luring new investors into the stock market.

"Bitcoin is a catalyst for a lot of interest. It's everybody. It's also giving the guy on the trading desk, sitting at a hedge fund, a shot in the arm," the founder of Birinyi Associates recently told CNBC.

Birinyi, who has said bitcoin looks to be a bubble, does not see the cryptocurrency as an investment, but more as a trading opportunity.

"Bitcoin has woken up a lot of people," he said.

Birinyi said more of the cash that's been sitting on the sidelines is making its way back into the stocks. "All of a sudden more and more people are aware there's a market going on, the stock market and there's a way to make money," he said.

While he would not invest in it, he has traded it, including Monday as the CME launched its bitcoin futures. "I made $3,000 in an hour," he said. "This is not investment money. This is the money you would spend on that new driver for your golf bag," he said.

"What I was trading was the fact there was an event. Futures were going to happen, which meant there was a focus on the area," he said.

Bitcoin futures got a muted reception after their debut on CME Group late on Sunday, with volumes in the tens of millions of dollars in the first 12 hours of trading, as warnings about the risks of bitcoin sounded ever louder, Reuters explained.

The launch of futures by the world’s biggest derivatives exchange operator, and by its rival Chicago-based exchange Cboe Global Markets a week earlier, had been hailed by many as the moment that bitcoin reached the investment mainstream.

That view has helped send bitcoin soaring even higher than before in recent weeks: it is on track for its best monthly performance in more than four years, having almost doubled in price since the start of December, when it was trading at less than $10,000.

But trading volumes in the CME and Cboe futures have so far been modest.

A total of 751 contracts - each of them for five bitcoins - had been traded on CME’s January futures contract as of 1417 GMT, at $18,970 per contract, just over 13 hours after their introduction, making a total notional value of around $70 million.

On its contract’s debut on Dec. 10, the Cboe traded nearly 4,000 contracts - with a contract size of one bitcoin - during the full session. By the same time on Monday, 2,712 of Cboe’s January bitcoin future contracts had been traded, making a total of just over $50 million notionally.

That compares with notional daily trading volumes of up to $4 billion on BitMEX, a Hong-Kong-based trading platform specializing in bitcoin futures that offers investors up to 100 times leverage on their positions, and which has an initial margin requirement of just 1 percent.

The CME and Cboe futures’ requirements make them unattractive to many cryptocurrency traders. They can only be traded when the exchanges are open, they require initial margins of 35 to 45 percent, and deposits must be made in dollars rather than bitcoins.

“As a trader ... the problem you have with these futures exchanges is there’s T+2 (settlement), weekends they are closed, bank holidays they’re closed,” said Alistair Milne, founder and manager of the Altana Digital Currency Fund.

“We’re all laughing at it because you have to send slow fiat to a futures exchange to post collateral on an asset that may move on a Sunday and margin-call you. It’s slightly ludicrous.”

(Newsmax wire services contributed to this report).

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Investment guru Laszlo Birinyi says that regardless of your personal opinion of bitcoin, the controversial digital currency does have one undeniable redeeming factor: It is luring new investors into the stock market.
laszlo birinyi, bitcoin, investors, stock market
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2017-00-19
Tuesday, 19 December 2017 02:00 PM
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