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Meet Chicagoans jumping into the world of bitcoin

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In January, Mike Haynes’ salary was cut in half as the tech startup he worked for restructured. By spring, he had burned through most of his savings. Now he’s one of the many speculators chasing their fortunes though bitcoin investing.

The CBOE Futures Exchange became the first traditional exchange to offer bitcoin futures trading Sunday evening, lending legitimacy to the digital currency while also bringing in investors who, unlike Haynes, don’t want the risk of owning bitcoin itself. Bitcoin futures allow investors to bet on the future price of the digital currency.

Haynes says he invested $5,000 in cryptocurrencies in May, a leap he decided to take after seeing an old friend pictured on Facebook with a Russian millionaire. That friend, who he met while working at a vape shop, had invested in bitcoin and Haynes decided it was worth the risk for him to try it too.

“Everybody thinks I’m crazy,” said Haynes, 31. “It was a huge gamble.”

It was a gamble that he says has paid off big time — at least so far. The price of bitcoin has soared his year from about $1,000 in January to about $17,000 on Monday. And the price keeps climbing despite loud criticism from some of the nation’s most respected financial minds, from Warren Buffett to the CEOs of JPMorgan Chase and Goldman Sachs. Bitcoin futures also are expected to start trading next week at the Chicago Mercantile Exchange, and according to media reports next year will trade on Nasdaq’s NFX market, a remarkably positive run for a currency that was created in 2009, and worth only pennies when it started trading the next year.

Haynes, who acknowledges past financial struggles, says it’s been a turning point in his life, one that has given him the opportunity to think about more concrete investments in the future.

“I came from nothing. I was a broke kid from the South Side of Chicago,” said Haynes, who has lived in Brighton Park, Bridgeport and the southwest suburbs. He says he plans to take some of the money that he’s earned through bitcoin trading and invest in something that he can see: real estate.

He first plans to find a residential building he can rent out, and then plans to buy a home of his own to share with his 8-year-old daughter. He’s also looking to intern with a mainstream financial expert so he can learn more about traditional investing, in part to hedge his virtual currency bets.

Haynes says he’s aware of the risks that trading bitcoin involves, but he says he’s not too concerned about a bubble.

“There might be a massive correction, but the show will go on,” he said. “I feel like I’ve gotten in early enough where I can weather the storm.”

Because the digital currency isn’t regulated by a country or group of countries, like the European Union, it can be more volatile. And some observers fear that the currency will eventually lose its luster with investors and its value will plunge. But Day One of futures trading showed that the currency may still have a ways to climb.

The first-ever bitcoin futures contract surged more than $3,000 to $18,580 eight hours after trading launched Sunday evening on the Chicago Board Options Exchange. The contract opened at $15,000, according to the CBOE.

The start of trading at 5 p.m. Sunday jammed the CBOE website, but trading was not disrupted. On Monday, trading was halted for several minutes when bitcoin futures gained 10 percent and again when they rose 20 percent. Those triggers are designed to calm the market.

One of those keeping a close eye on the trading was Michael Unetich, vice president of cryptocurrencies at Trading Technologies, a futures software developer in the Loop. Unetich helped tailor their platform which professional traders use for crypto futures trading, and also invests in some cryptocurrencies himself.

He credits the rapid rise in bitcoin’s price on Monday to “pent-up demand” from those investors who deemed standard bitcoin trading too risky.

“I think (the futures trades) have gone off without a hitch,” he said, noting that the measures that CBOE has put in place — like trading halts when the price rises rapidly — have worked well so far.

But the real test of investors’ appetite for bitcoin will happen next week, he said. The Chicago Mercantile Exchange will start trading its own futures Monday, offering far higher volume than CBOE.

“I think the really big bang will happen next week,” Unetich said.

Unetich said he believes that bitcoin’s future is brighter than those high-profile detractors may think, but he urges caution on behalf of investors.

“I’m a believer that over time there’s a strong case for the success of a digital currency, but that doesn’t mean I think someone should just close their eyes and buy,” he said.

sbomkamp@chicagotribune.com

Twitter @SamWillTravel





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