{"id":215657,"date":"2017-12-11T07:48:06","date_gmt":"2017-12-11T05:48:06","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=215657"},"modified":"2017-12-11T07:48:06","modified_gmt":"2017-12-11T05:48:06","slug":"bitcoin-futures-start-with-a-bang","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/215657\/bitcoin-futures-start-with-a-bang\/","title":{"rendered":"Bitcoin futures start with a bang"},"content":{"rendered":"
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Bitcoin landed on Wall Street with a bang.<\/p>\n

Futures on the world\u2019s most popular cryptocurrency surged as much as 25% during their debut session on Cboe Global Markets Inc\u2019s exchange, triggering two temporary trading halts meant to cool volatility. Dealers said initial volumes exceeded expectations, while traffic on Cboe\u2019s website was so strong that it caused delays and outages.<\/p>\n

The exchange said all its trading systems were normal.<\/p>\n

\u201cIt was pretty easy to trade,\u201d Joe Van Hecke, managing partner at Chicago-based Grace Hall Trading LLC, said in a telephone interview from Charlotte, North Carolina. \u201cI think you\u2019ll see a robust market as time plays out.\u201d<\/p>\n

The launch of futures traded on a regulated exchange is a watershed for bitcoin – testing infrastructure that will make it easier for legions of professional traders and mainstream investors to bet on the cryptocurrency\u2019s rise or fall, potentially helping to steer its price.<\/p>\n

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\u2019ve stolen digital tokens.<\/p>\n

Bitcoin futures expiring in January were priced at $17,780 as of\u00a012:57 p.m. Hong Kong time, up from an opening level of $15,000. About 2,300 contracts changed hands.<\/p>\n

Circuit Breakers<\/h3>\n

The first trading halt came about 2 1\/2 hours after the session began, while the second one triggered after four hours. Cboe imposes circuit breakers to curb volatility, halting transactions for two minutes if prices rise or fall 10%, and for five minutes at 20 percent. Trading will stop for at least five minutes if the rally extends to 30%, Cboe said in a notice on its website.<\/p>\n

Bitcoin last changed hands at $16,318, up about 4.3% since late Friday, according to the composite price on Bloomberg.<\/p>\n

\u201cSo far, looking at the contract volume traded, we believe that there is a decent demand and this is driving up the price of bitcoin,\u201d said Naeem Aslam, chief market analyst at TF Global Markets in London. \u201cPrices are going higher because of the increase in confidence.\u201d<\/p>\n

CME Group Inc\u2019s exchange is set to start offering similar futures next week.<\/p>\n

Once the markets are better established, professional traders will arbitrage between the Cboe and CME futures and bitcoin itself, improving pricing efficiency, Aslam said.<\/p>\n

\u201cIn the future, traders will also start arbitraging and speculation will go in another higher gear,\u201d Aslam said.<\/p>\n

Meteoric Rise<\/h3>\n

At this point, some people who would like to trade futures are having a hard 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 may also be limited because of higher capital requirements and tighter risk limits, See said.<\/p>\n

Being on the sidelines has been painful. This year alone, bitcoin is up more than 1,600%. The surge has been driven largely by demand from individual investors, even as technical obstacles kept out big money managers like mutual funds.<\/p>\n

Derivatives trading is the culmination of a wild year for bitcoin, which captured imaginations and investment around the world, propelled by its stratospheric gains and its anti-establishment mission as a currency without the backing of a government or a central bank. The derivatives contracts should thrust bitcoin more squarely into the realm of regulators, banks and institutional investors.<\/p>\n

Both Cboe and CME on Dec. 1 got permission to offer the contracts after\u00a0pledging to the U.S. Commodity Futures Trading Commission that the products don\u2019t run afoul of the law, in a process called self-certification.<\/p>\n

Not everyone is convinced it\u2019s a good idea.\u00a0On Dec. 6, the Futures Industry Association – a group of major banks, brokers and traders – said the contracts were rushed without enough consideration of the risks.<\/p>\n

Last month, Thomas Peterffy, the billionaire chairman of Interactive Brokers Group Inc, wrote an open letter to CFTC Chairman J. Christopher Giancarlo, arguing that bitcoin\u2019s large price swings mean its futures contracts shouldn\u2019t be allowed on platforms that clear other derivatives.<\/p>\n

Still, Interactive Brokers is offering its customers access to the futures, though with greater restrictions. They won\u2019t be able to go short — betting that prices will decline – and Interactive\u2019s margin requirement, or\u00a0how much investors have to set aside as collateral, will be at least 50%. That\u2019s higher than either Cboe\u2019s or CME\u2019s margin requirements.<\/p>\n

Cboe\u2019s\u00a0futures are cash-settled and based on the Gemini auction price for bitcoin in US dollars. Margins for the contracts, which will be cleared by Options Clearing Corp, will be at 40% or higher.<\/p>\n

\n

Read: Bitcoin\u2019s own valuation measure is meaningless: analyst<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Bitcoin landed on Wall Street with a bang. Futures on the world\u2019s most popular cryptocurrency surged as much as 25% during their debut session on Cboe Global Markets Inc\u2019s exchange, triggering two temporary trading halts meant to cool volatility. <\/p>\n","protected":false},"author":59,"featured_media":208605,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[961],"tags":[5537],"class_list":["post-215657","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-bitcoin"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/215657","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=215657"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/215657\/revisions"}],"predecessor-version":[{"id":215659,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/215657\/revisions\/215659"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/208605"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=215657"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=215657"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=215657"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}