Bitcoin futures adds some legitimacy to the cryptocurrency, but there is a downside, noted Wall Street analyst Nick Colas told CNBC on Friday.
He's concerned that over the next couple of weeks hackers will try to get into the wallets and exchanges that trade bitcoin in order to drive prices down, as well as cause uncertainty about the quality of the underlying asset. Then they can play in the futures market in an effort to make money.
"That is the danger of attaching a very established asset type, like futures, to the Wild West, which is the bitcoin ecosystem. That, I think, is what a lot of market observers, particularly in the futures market, are worried about and rightly so," Colas, the co-founder of DataTrek Research, said in an interview with "Closing Bell."
Colas was the first Wall Street analyst to cover bitcoin, which has been on a wild ride of late. The digital currency soared from about $11,000 on Monday morning to above $19,000 on Thursday.
It then dropped down to about $15,000.
On Friday at 5:35 p.m. ET, bitcoin was trading at $16,150 on Coinbase, which accounts for about a third of the digital currency's volume on any given day. The price on Coinbase has traded at a premium to the level on other exchanges.
The volatility comes as two exchanges ramp up to start trading futures contracts on the cryptocurrency in the upcoming days.
On Sunday, Chicago-based Cboe Global Markets is set to launch bitcoin futures, and CME, the world's largest futures exchange, is planning to launch its futures product next week.
While there have been some concerns about trading futures on an unregulated asset such as bitcoin, Colas pointed out that there is already state regulation of the wallets that sell the digital currency.
And he thinks larger regulation may be tricky since there is interest in bitcoin all over the globe.
"You'd have to have one coordinated regulatory body for the entire world financial system," he said.
If that were to happen, "then you probably don't have much of an asset left, because that regulation would push down the price because it would lose some of its allure."
There have also been warnings that bitcoin is a bubble waiting to pop.
However, strategist Sam Stovall isn't necessarily concerned about the effects on the overall market.
That's because it is not like the tech bubble of 1999, when technology represented a third of the S&P 500's weighting, the chief investment strategist at CFRA told "Closing Bell."
"When we do have the increased volatility [in bitcoin] it will probably end up being much more of a headline event than a bottom-line event, unless of course we find out that some masters of the universe, like long-term capital management, ended up getting a little too speculative," Stovall said.