Bitcoin prices jumped on Sunday evening right as the Cboe Futures Exchange began trading futures on the cryptocurrency.
The digital currency was at $14,890 right at 6 p.m. New York time and then surged about $600 to $15,500.13 as of 7:17 p.m. on the Coinbase exchange.
The new futures were up 2.6 percent to $15,860 on the Cboe in very early trading. They also turned negative for a brief moment at about 6:55 p.m. New York time before bouncing back.The exchange launched the futures under the ‘XBT’ ticker symbol following a huge ramp-up in the digital currency’s price this year.
“So far, trading has been smooth. I think that was the biggest worry for people” heading into the launch, said JJ Kinahan, chief market strategist at TD Ameritrade. “We’ve been trading for about an hour and more than 700 contracts have been traded. So, I’d say this is a successful launch.”
Interest was so great in the new product, it appeared to be overloading Cboe’s website. “Due to heavy traffic on our website, visitors to http://www.cboe.com may find that it is performing slower than usual and may at times be temporarily unavailable,” the exchange said in a statement. “All trading systems are operating normally.”
The launch lets institutional investors buy into the cryptocurrency space. Until now, bitcoin has been mostly owned and traded by a few entrepreneurs.
But not everyone was ready to jump head first into the cryptocurrencies pool on Sunday. Andrew Keene, CEO of AlphaShark Trading, noted that trading volume on the futures was very low. Keene noted that the low volume could be a sign that traders want to see how the futures launch goes before trading them.
He also said that the bid-to-ask price spread was “too wide” for him to trade the futures right away. “I can’t trade a product when the spread is $120. If those spreads tighten up, then it will be much easier” for people to trade. Keene noted that the low volume could be a sign that traders want to see how the futures launch goes before trading them.
Bitcoin has become immensely popular this year, sending its price through the roof. In 2017 alone, bitcoin has shot up more than 1,000 percent. In the past month, the cryptocurrency is up more than $8,000 to trade at $14,950.06 on the Coinbase exchange shortly before the beginning of futures trading Sunday. It briefly broke above $19,000 on that exchange Thursday, before retreating.
Bitcoin year to date
Cboe will base the price of bitcoin futures using the Gemini Trust Company, an exchange co-founded by the Winklevoss twins. One futures contract will be worth one bitcoin at the Cboe.
Bitcoin is one of the most volatile assets in the world right now rising and falling more than 20 percent at times in the span of a day. On Thursday, for example, bitcoin hit a high of $19,340 before falling more than 20 percent from that level. Such volatile trading — along with cybersecurity concerns and an association with criminal activity — has raised skepticism from major Wall Street institutions.
But launching bitcoin futures at the Cboe — one of the largest exchanges in the world — gives the digital currency some legitimacy it in the eyes of institutional investors. Bitcoin will also get a second dose of legitimacy after the CME Group launches its own bitcoin futures a week later. One CME bitcoin futures contract will be worth five bitcoins.
“The introduction of derivatives provides the necessary market structure for institutions to allocate to crypto-currencies,” which are short-term and long-term positives, according to Tom Lee, founder and head of research at Fundstrat Global Advisors. He also notes derivatives are “the first step to enable the creation of ETFs and other more liquid instruments.”
Source : CNBC