The First Ever Bitcoin Futures Launch In CBOE Platform Amidst Much Volatility
The very first Bitcoin futures which created quite a stir in crypto market for sometime had finally been launched by Chicago Board Options Exchange (CBOE) on Sunday, December 10. But within hours of its launch it had to undergo an extreme volatile patch which as we all know is an inherent character of these digital tokens.
The Bitcoin futures climbed up the price ladder by 10% within just two hours after its ET launch at 6 p.m. thereby triggering a trading halt for two minutes. The futures had increased in price by 20% within 10:05 p.m. causing another trading halt for five long minutes. All exchange rules were followed by proceeding with these halts in line with halting of stock trading following sharp price moves. The launch of bitcoin futures is being viewed by various cryptocurrency proponents as a big step towards legitimizing digital currencies in front of the institutional investors. Tom Lehrkinder, a senior analyst working at the consulting firm Tabb Group pointed out that these halts are “not surprising based on the volatility of the underlying [asset]. The futures are behaving as expected and designed.”
These bitcoin futures were launched by CBOE under the ticker symbol of “XBT” on Sunday. However the futures launch was closely followed by a price rally of Bitcoin which skyrocketed above $16400 . The first futures contract having an expiry date in 17th January 2018 traded at $18490 on 11:19 p.m., ET and turned negative for a brief period at 6:55 p.m. before bouncing back to its track of glory. Posts in social media pointed at contract purchases which are scheduled to expire in 14th March of the coming fiscal. The price of Bitcoin had increased by leaps and bounds after announcement of such futures trading were made months back. Thus it is very obvious that the final level interest of investors in the same would also be immense.
At the time of publishing this article, Bitcoin price was $16,681 with a market cap of $279,131,930,525.
The new product garnered so much interest that CBOE’s website became overloaded with the surge of traffic. The exchange said in a statement that,
“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. All trading systems are operating normally.”
Till now Bitcoin was traded mostly by a handful of entrepreneurs. However in the coming days, institutional investors can also buy into the crypto space. In spite of gaining magnanimous interest, analysts feel that the response could still have been better. They pointed out that within two-and-a-half hours following the launch, only 800 contracts were traded. Bobby Cho, the head trader at Cumberland, a leading cryptocurrency bitcoin trading company was quoted as saying that,
“There aren’t that many market participants. People are just going about trading very thoughtfully, very mindfully.”
The number of contracts crossed the 1500 figure within just four hours of the futures launch. Tabb’s Lehrkinder said that, “it works. There’s buyers and sellers.”
He however agreed to the fact that crypto trading cannot be accessed by some funds and it will take time before such funds can utilize futures to bet against or short bitcoin gains. Andrew Keene, the CEO of AlphaShark Trading, felt that the bid-to-ask price spread was “too wide” for him to engage in impromptu futures trading. He exclaimed that, “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.
CBOE is taking aid from the Gemini Trust Company for basing the price of its bitcoin futures wherein each futures contract shall be equivalent in value to one Bitcoin. Once CME launches its futures contract which is known to be worth Five bitcoins, institutional investors shall receive further support as this can pave the path for bitcoin legitimization. Tom Lee, the founder and head of research at Fundstrat Global Advisors feels that,
“The introduction of derivatives provides the necessary market structure for institutions to allocate to crypto-currencies,” which are short-term and long-term positives. He also added that derivatives are “the first step to enable the creation of ETFs and other more liquid instruments.”
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