Bitcoin landed on Wall Street with a bang.
Four hours after the debut of Cboe Global Markets Inc’s bitcoin futures, the contracts climbed more than 20 percent and triggered two trading halts designed to cool volatility. Dealers said initial volumes exceeded expectations, while traffic on Cboe’s Web site was so strong that it caused delays and outages.
“It was pretty easy to trade,” Joe van Hecke, managing partner at Chicago-based Grace Hall Trading LLC, said in a telephone interview from Charlotte, North Carolina. “I think you’ll see a robust market as time plays out.”
The launch of futures traded on a regulated exchange is a watershed for bitcoin — testing infrastructure that would make it easier for legions of professional traders and mainstream investors to bet on the cryptocurrency’s rise or fall, potentially helping to steer its price. Until now, trading in bitcoin was driven mainly by individual investors who were willing to risk buying on mostly unregulated markets. Some users of those little-policed venues have been targeted by hackers who have stolen digital tokens.
As of 10:15pm New York time on Sunday, bitcoin futures expiring in January were priced at US$17,780, up from an opening level of US$15,000. About 1,739 contracts traded hands.
The second halt came at 10:05pm, four hours after trading began, the Cboe Web site said.
The exchange imposes circuit breakers to curb volatility, halting transactions for two minutes if prices rise or fall 10 percent. Trading pauses for five minutes at 20 percent.
Bitcoin last changed hands at US$16,600, up about 6.1 percent since late Friday, the composite price on Bloomberg showed.
“So far, looking at the contract volume traded, we believe that there is a decent demand and this is driving up the price of bitcoin,” said Naeem Aslam, chief market analyst at TF Global Markets in London. “Prices are going higher because of the increase in confidence.”
CME Group Inc’s exchange is set to start offering similar futures next week.
Once the markets are better established, professional traders would arbitrage between the Cboe and CME futures and bitcoin itself, improving pricing efficiency, Aslam said.
“In the future, traders would also start arbitraging and speculation would go in another higher gear,” Aslam said.
At this point, some people who would like to trade futures are having a difficult time accessing the market because not all brokers are supporting it initially, said Garrett See, chief executive officer of DV Chain, a sister company of trading firm DV Trading.
Participation might also be limited because of higher capital requirements and tighter risk limits, See said.
Being on the sidelines has been painful. This year alone, bitcoin is up more than 1,600 percent. The surge has been driven largely by demand from individual investors, even as technical obstacles kept out big money managers such as mutual funds.
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