Bitcoin Futures Are Here, and They’re Already Making Waves.
Bitcoin made its long-awaited debut last night on futures exchange Cboe, and, as so often with this currency, things were dramatic. The January contract climbed $3000, twice triggering the exchange’s “circuit breakers”, mandatory trading breaks to let everyone take a breath when prices are moving rapidly.
The Cboe takes its pricing from the New York’s Gemini exchange, whose bitcoin price at market open was $15,000. The January 2018 contract traded around $2,000 above the cash contract, meaning that the market expects bitcoin prices to keep rising. It reached as high as $18,700, settling at $18,000 at market close.
Fear of short selling
Many in the bitcoin community are breathing a sigh of relief today. There had been fears that futures trading might unleash enormous downwards pressure on prices as scepticism over the cryptocurrency could finally express itself. Popular financial commentator Jim Cramer had claimed that this “monopoly money” would get “annihilated” by short-sellers. Instead bitcoin appears boosted by a successful first day’s futures trading. At time of writing it is being bought at over $16,900 on the Gemini exchange.
The January contract was highly volatile, which is perhaps to be expected as the market becomes open to new customers and takes some time to find its level. The Cboe has “circuit breakers” whereby the exchange pauses trading in response to large price movements. These were triggered twice during the session.
It seems that interest in the contract was greater than anyone expected. Within minutes of launch the Cboe’s website crashed due heavy traffic. Nick Szabo, the computer scientist and one of the fathers of bitcoin, noted on Twitter that bitcoin was not the risk, it was the institutions dealing in bitcoin which had the problems:
Bitcoin itself is still up as usual. Trusted third parties are reliability risks.”
The launch of bitcoin contracts on a regulated exchange has been seen by many as a coming-of-age for cryptocurrency, a move out of the margins and into society at large. This “normalization” of bitcoin is one of the factors behind its incredible price increase in 2017.
The CME will start its own futures contract next week, although not everyone is convinced that the markets have been properly prepared. Whatever happens there one thing is certain, bitcoin has just taken a huge step into the financial mainstream.