The first financial exchange in the world to offer Bitcoin derivatives has a Loyola finance professor as one of its key players.
While some other financial exchanges have since started offering cryptocurrency speculation, the Chicago-based Cboe Global Markets became the world’s first in December. Adjunct finance professor Russell Rhoads is the company’s resident cryptocurrency expert — which, to him, just means he’s the most informed on it.
“I will fully admit that I don’t know everything,” Rhoads said. “I don’t think anybody knows everything [about Bitcoin].”
Bitcoin — like most cryptocurrencies — is a digital, finite currency that isn’t regulated by any government. Many speculators have invested in Bitcoin as its price, or value, has continued to rise, but can still be used for transactions like any other currency. All Bitcoin transactions are verified by the online community, recorded and listed in a digital public ledger called the Blockchain.
Cboe offers Bitcoin derivatives, a type of contract that gets its value from the performance of another asset, as a way to minimize the risk from investing in the highly volatile digital coin. Despite reaching record prices in December, the price has dipped and dived numerous times before rising again.
Bitcoin’s price currently sits around $9,000. After Cboe launched its Bitcoin trading Dec. 11, 2017, prices jumped by nearly $5,000 in a week to the coin’s all-time high of just under $20,000, according to price charts.
Cboe has partnered with the New York-based Gemini Trust Company, an exchange firm run by Cameron and Tyler Winklevoss, the twins notorious for alleging Mark Zuckerberg stole the idea for Facebook from them.
The Winklevoss twins have more than $1 billion in their Bitcoin portfolio, Fortune reported. Gemini, their Bitcoin venture, is a digital asset exchange where users can buy, sell and store cryptocurrencies such as Bitcoin and Ethereum. Gemini is regulated under New York state financial and banking laws.
The twins have sought to increase the legitimacy of cryptocurrency investments. Aside from running Gemini under the purview of regulation, they tried and failed last year to get the United States Securities and Exchange Commission to change stock market rules which would’ve allowed people to buy, trade and sell Bitcoin like any other stock.
“I really do like their approach that we want to have the crypto space emerge as a properly regulated market,” Rhoads said of the twins.
A spokesperson for Gemini declined to comment on the Winklevoss twins’ involvement with Cboe.
Once he was tapped to get up to speed on cryptocurrency, Rhoads started studying. He said on a daylong flight to Asia he indulged in hours of financial podcasts and read books the twins recommended him.
Now, Rhoads said he’s trying to create a Loyola J-term class centered around cryptocurrency. He said he believes students entering the world of finance should also be educated on it, regardless of their personal investment decisions.
Rhoads said he thinks students have better standing to hop on the Bitcoin bandwagon.
“Younger investors are actually pointed toward riskier investments earlier in their life,” Rhoads said.
Simply put, he said, they have less to lose and more time ahead to earn money back should any blunders hit them.
To call Bitcoin a risk is an understatement — the digital coin is known for its high volatility, and the Winklevoss’ portfolio has fluctuated above and below $1 billion as the coin’s price has wavered.
Still, Rhoads said Cboe’s bitcoin exchange has brought in a broad base of investors, including Bitcoin miners, who use the derivatives to try to hedge risk and lock in a future price for the coin. Miners solve algorithms with computers to gain Bitcoin and verify transactions.
Another reason Rhoads said he believes students should embrace Bitcoin and cryptocurrency is so they remain on the cutting edge of emerging financial technology.
James Pickard is one such student. A Loyola senior and soon-to-be graduate, he co-founded the Bitcoin and Blockchain Exploration club on campus. Pickard said he attended an on-campus talk Rhoads conducted about Bitcoin in February.
Pickard, an entrepreneurship major, said he’s invested in a bunch of cryptocurrencies, such as Bitcoin, Ethereum and Eos, and advised other curious business students to follow Rhoads’ advice.
“It’s trying to get ahead of the curve,” the 23-year-old said. “It’s going to be the future of how everything works, in my opinion.”
While more seasoned traders can hold the upper hand against recent college graduates entering the financial world, Rhoads said innovative financial systems like cryptocurrency allow young investors and traders to get a foot in the door.
“Pay attention to the new stuff, because they’re all the same playing field and you never know what’s going to work out,” Rhoads said.