Bitcoin Futures Soar on CBOE Then Settle After Debut

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Bitcoin futures opened at 8pm EST at $15,000 on Sunday and climbed to $18,700 in their first day of trading under the ticker, XBT, according to CBOE Global Markets, as they waive all fees for Bitcoin futures until the end of December.

“Due to heavy traffic on our website, visitors to 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, according to the AP. But it said the trading in the futures had not been disrupted.

Today, the price of Bitcoin rose to $16,785 on GDAX and $16,658 on Gemini as of 7:51am EST. Bitcoin has risen over 1,500% in 2017, mostly by individual retail investors. Increases in recent weeks may have been driven in part by the anticipation of Bitcoin futures.

The CBOE futures do not involve trading the underlying asset, Bitcoin. Instead, these securities track the price of Bitcoin on Gemini, a widely used Bitcoin exchange, and will settle in cash.

The Chicago Mercantile Exchange (CME), owned by CME Group, is a competitor exchange to the CBOE and will start trading Bitcoin futures on Monday, December 18, 2017. This is after six weeks of discussions that led to approval for the exchange by the Commodities Futures Trading Commission, the primary regulator for exchanges like the CME. Unlike the CBOE, which tracks Bitcoin prices on Gemini, CME will track these prices on four Bitcoin exchanges: Bitstamp, GDAX, itBit and Kraken. Due to its volatility, Bitcoin futures will be subject higher margin levels and intraday price limits, the CME said.

These Bitcoin futures enable pension funds and other large institutions to participate, as well as large banks. J.P. Morgan, The Royal Bank of Canada (RBC) and Goldman Sachs will only allow certain clients to trade Bitcoin futures, in order to reduce their overall risk while overcoming the challenge of matching buyers to sellers, due to Bitcoin’s volatility, according to CBC. Other institutions, such as Ally Financial, will also let users buy Bitcoin futures.

According to Karl Schamotta, Director of Global Product and Market Strategy, Cambridge Global Payments, Bitcoin futures are a “dangerous experiment.” Schamotta states that, “The CBOE and CME, both of the exchanges that are offering this product have really provided sort of a veneer of legitimacy to this.”

The majority of people investing in Bitcoin futures are expected to be institutional investors, accredited investors and brokers who represent wealthy clients.

Possible concerns over Bitcoin futures are over the potential for manipulation by large institutional investors and Wallstreet. However, Frank Chaparro of Business Insider states that Bitcoin futures could “pave the wave for an exchange-traded fund, which could bring more investments into the space. Most importantly, it could help dampen bitcoin’s spine-tingling volatility.”

The next two weeks will determine whether a large volume of liquidity enters the market, through the CBOE and CME, and its impact on Bitcoin pricing.

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