Bitcoin futures ease after spiking at launch
Bitcoin futures eased back from an initial surge of almost 22 percent to trade up 13 percent on Monday, in an eagerly awaited US market debut that backers hope will confer greater legitimacy on the volatile cryptocurrency and lead to its wider use.
Although bitcoin futures were already offered on some unregulated cryptocurrency exchanges outside the United States, the Chicago-based Cboe Global Markets’ launch marked the first time investors could get exposure to the market via a mainstream regulated exchange.
The debut on Sunday night may have caused an early outage of the Cboe website. The exchange said that due to heavy traffic, the site “may be temporarily unavailable”.
The one-month bitcoin contract opened trade at 6 pm ET Sunday at $15,460, dipped briefly before rising to a high of $18,700 and then slipping again.
As of 6:12 a.m. ET Monday, the one-month future was up 13 percent from the open at $17,450, around $1,000 higher than the “spot” bitcoin price — the price at which bitcoin is currently being bought and sold.
The two-month contract was trading at $18,880, while the three-month contract was changing hands at $19,040.
“The premiums have so far been very high, demonstrating that few want to take the short side of the trade,” said Altana Digital Currency Fund manager Alistair Milne, whose fund has $35 million in assets under management.
In just over 12 hours after the launch, 2,780 contracts had been traded, meaning around $48.5 million had been notionally invested. That compares with daily trading volumes of more than $20 billion across all cryptocurrencies, according to trade website Coinmarketcap.
Just 13 trades of the two-month contracts had been traded.
“It will take time for derivative volumes to build up, but eventually if they prove to be a significant percentage of the global trade, they should in theory help stabilize things,” said Milne.
Bitcoin is up more than 1,500 percent so far in 2017, having started the year at less than $1,000, and its gains in the past month have been rapid.
Controversial move
Bitcoin fans appear excited about the prospect of an exchange-listed and regulated product and the ability to bet on its price swings without having to sign up for a digital wallet.
Others, however, caution that risks remain for investors and possibly even the clearing organizations underpinning the trades.
“You are going to open up the market to a whole lot of people who aren’t currently in bitcoin,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
The launch has so far received a mixed reception from big US banks and brokerages, though.
Several online brokerages, including Charles Schwab and TD Ameritrade, did not allow trading of the new futures immediately.
The Financial Times reported on Friday that JPMorgan Chase and Citigroup would not immediately clear bitcoin trades for clients.
Goldman Sachs said on Thursday it was planning to clear such trades for certain clients.
Bitcoin’s manic run-up this year has boosted volatility far in excess of other asset classes. The futures trading may help dampen some of the sharp moves, analysts said.
“Hypothetically, volatility over the long run should drop after institutions get involved,” Gottlieb said. “But there may not be an immediate impact, say in the first month.”