As you casually proceeded with your morning activities, Bitcoin futures got launched at Chicago Mercantile Exchange (CME), the world’s biggest trading platform with a bullish stance. The 18th January contracts opened with a sale price of more than $20,000. This event occurred months after the announcement made by this Chicago-based derivative exchange operator to come ahead with Bitcoin future trading which started off at 6 p.m. CST. The opening price of the January contract at that time was $20,650, which was $1,150 more than the last price of $19500 on CME’s reference rate. CME has revealed that during first hour of trading, about 200 contracts were purchased. The website of the operator also revealed that one February 2018 and one March 2018 contracts were sold apart from two other contracts having an expiry date of June.
The contracts have been trading at premium rates against the Bitcoin price since the very onset. As per Bitcoin Price Index, these contracts were priced at $19400 when futures were launched by CME. The last week has been one crazy ride for the institutional investors of Bitcoins starting with the launch of Bitcoin futures by CBOE and very recently by CME.
Following the footsteps of these two Chicago based future exchanges, Wall Street’s Cantor Fitzgerald and Nasdaq have also announced the launch of their Bitcoin related products in the coming fiscal. Amidst all these, the fatigue shown by CME’s product launch cannot be overlooked. With CME being a bigger player, traders were expectant of it creating a bigger splash in crypto sphere. However, the reality was a far cry as the website of CME remained stable and did not suffer from surging traffic which was experienced when Bitcoin futures were launched for the first time by rival CBOE causing its website to become inaccessible for a temporary span of time. Bitcoin even saw a sell-off over the first trading hour with the price falling down to $18424.
But the efficient pricing model of CME helped it in getting a faster start with its most-active contract changing hands for 221 times in first trading hour compared to CBOE’s debut with 570 first hour contracts. Irrespective of the numbers, it denotes a win for CME as its contracts are five times more valuable in comparison to CBOE. The first day of CBOE trading paved the way for its futures being priced at 13% above Bitcoin hinting at inefficient trading whereas CME futures were priced 2% above Bitcoin.
Gabor Gurbacs, the director of digital-asset strategy at VanEck Associates Corp pointed out that,
“One of the biggest issues when it comes to investing institutionally in digital assets is banks and larger institutions can’t hold an unregulated instrument in their balance sheet, and a futures contract is something they can hold.”
He added that, with futures, “you don’t hold the physical bitcoin, which solves custody issues and counterparty risks with these less-regulated exchanges.”
For safeguarding investors against wild price swings, trading will be briefly paused by CME if the price of the contracts fluctuates by more than 7-13%.
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