Bitcoin futures launch could be bad for bitcoin’s price, tech analyst Gene Munster says

  • Bitcoin futures could have a negative effect on the price of bitcoin, Loup Ventures' Gene Munster says.
  • Munster says the futures will make it easier for investors to bet against bitcoin, and investors may also find it more attractive to trade the futures rather than bitcoin itself.
  • He is also worried that fundamentals don't support the rapid surge in the cryptocurrency's price, especially since the general public now appears to be jumping onto the trend.

The launch of bitcoin futures could "have a material negative impact on the price of bitcoin," a well-respected technology analyst said Monday.

With the futures, "investors will have an easier time betting against bitcoin," and "investors could move towards trading futures contracts and out of bitcoin itself," Gene Munster, co-founder of venture capital firm Loup Ventures, said in a research note Monday. Munster was a widely followed Apple analyst at Piper Jaffray before launching Loup in January to focus on artificial intelligence, robotics, virtual reality and augmented reality.

Munster pointed out that since the bitcoin futures contracts settle in dollars, the derivative product gives investors "better liquidity than bitcoin." "For institutional investors, betting on bitcoin without having to conduct bitcoin transactions is likely to prove easier," Munster said.

Bitcoin's initial reaction to the launch of futures on the Cboe Futures Exchange on Sunday evening was positive. The digital currency was 9 percent higher Monday morning near $16,380, according to CoinDesk's bitcoin price index.

Bitcoin 12-month performance

Source: CoinDesk

The new futures soared nearly 20 percent overnight, triggering two trading halts in their Sunday debut. CME is set to launch its own bitcoin futures contract Dec. 18.

The launch of bitcoin futures on two of the world's largest futures exchanges marks a step toward legitimizing the digital currency as an asset class for institutional investors, and could pave the way toward a bitcoin exchange-traded fund. Enthusiasts predict bitcoin futures will allow large investors to buy into the cryptocurrency trend.

However, the overarching worry is that bitcoin's dramatic price surge is unsustainable. The digital currency surged more than 1,700 percent to a record $17,364.56 on Thursday, according to CoinDesk.

"Fundamentals don't seem to support [bitcoin's] move," Munster said, pointing out that using bitcoin for retail purchases is still not easy. "It's more likely than not that bitcoin is in a bubble and the price of bitcoin will be extremely volatile, especially as more futures exchanges open."

The biggest red flag for Munster follows the adage "when your barber gets in, it's time to get out."

"Well, it's 2017 and our Uber drivers may be just as good of a measure. Two weeks ago, we had an Uber driver ask us how to buy bitcoin. We showed her how to sign up on Coinbase and she made the purchase before the end of our trip. A cautionary one-off story that illustrates the bitcoin investor shift over the past year from tech-futurist, to professional investor, and now the general public."