Bitcoin doesn’t pose any threat to the financial stability of the markets. It’s unlikely that it will shake up the mainstream markets in the coming years, according to a group of leading European economists.
According to the survey of close to 50 academics from European universities by the Centre for Economic Policy Research and the Centre for Macroeconomics, the majority are optimistic regarding the risks that are posed by the cryptocurrency, despite the repeated warnings from senior financiers.
The small size of Bitcoin and its detachment from the broader financial system was one of the primary reasons for comfort among the economists, who said that major investment groups didn’t hold significant amounts of the cryptocurrency. Even though the value of Bitcoin has grown by over 900% this year, its total value is approximately $300 billion. This amount pales in comparison to the almost $80 trillion of the total value of global shares.
The chief executives at Goldman Sachs and JP Morgan, as well as some senior financiers, have warned against Bitcoin in the recent months. However, the Royal Bank of Scotland’s chairman has likened it to Dante’s Inferno. He says it was a speculative bubble that requires an apocalyptic health warning for the investors from central banks.
Raising of fear
Fear has been raised due to the ability of banks to cover the losses on Bitcoin trading. A group of major investment banks writing a letter to US regulators indicating that the system of regulation was ill-prepared.
The cryptocurrency has become even more part of the greater financial system following its debut on Sunday morning when the Chicago Mercantile Exchange (CME), the world’s largest futures exchange, became the second exchange that offers Bitcoin derivatives trading. Initially, the January 2018 contract traded on the CME hit above $20,000. However, it later fell, with an original price at $19,500.
Wouter de Haan, from the London School of Economics, noted a word of caution. He responded to the survey and said that the past crises indicated that all it could take would be just one key financial institution who would take on on large, risky positions that would put the system at risk.
Although the majority of economists believed that financial stability has limited risks, they also said that governments need to introduce greater controls for cryptocurrencies as their opacity and anonymity could help to enable tax evasion and other criminal activities.
The theory of Nicholas Oulton from the London School of Economics is to crack down on the money laundering and tax evasion through tax havens. According to him, it would appear to be odd to allow cryptocurrencies to get around these restrictions.
Hacks and losses
These findings follow after a South Korean cryptocurrency exchange appears ready to file for bankruptcy after it was hacked this year for the second time. This highlights the concerns about the security surrounding the growing trade in Bitcoin and other cryptocurrencies.
Youbit, an exchange, has been hacked before in April. During this hack, close to 4,000 bitcoins were stolen in a cyber-attack. The South Korean spy agency linked the cyber-attack to North Korea, according to a recent report by a South Korean newspaper.
On Tuesday, Youbit announced on its website that it had been hacked at 4:35 am local time. This hack caused a loss worth 17% of its total assets.
Youbit didn’t mention the amount. However, it did say that all the cryptocurrency assets of its customers would be marked down to 75% of their value. It also announced that it has stopped trading and is working to minimise customer losses.
This is the second hacking in 2 weeks. The hackers who broke into NiceHash, a Slovenian-based Bitcoin mining marketplace stoke almost $64 million of Bitcoin.
There is a history of Bitcoin wallets and exchanges being targeted. The security experts say that as valuations rise, they become more vulnerable to cybercrime.
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