{"id":215951,"date":"2017-12-12T07:44:38","date_gmt":"2017-12-12T05:44:38","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=215951"},"modified":"2017-12-12T07:46:40","modified_gmt":"2017-12-12T05:46:40","slug":"bitcoins-first-24-hours-on-wall-street-feed-euphoria-and-doubts","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/215951\/bitcoins-first-24-hours-on-wall-street-feed-euphoria-and-doubts\/","title":{"rendered":"Bitcoin’s first 24 hours on Wall Street feed euphoria and doubts"},"content":{"rendered":"
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Bitcoin\u2019s triumphant debut on Wall Street hasn\u2019t ended the financial industry\u2019s skepticism.<\/p>\n

The new breed of futures contracts that launched on Cboe Global Markets Inc\u2019s exchange late Sunday quickly became a 24-hour microcosm of bitcoin\u2019s own wild ride this year, marked by technical glitches and surging valuations. The first day left true believers cheering, yet kept many mainstream financial professionals peering uneasily from the sidelines.<\/p>\n

While the derivatives were a success by some key measures – they\u00a0didn\u2019t blow up – their 24 percent rise in price in the first session\u00a0also bolstered longstanding misgivings about speculation.<\/p>\n

The contracts offer an easier way for investors to short the cryptocurrency, but instead buyers bid them up as much as 13% higher than the underlying asset – setting off two temporary trading halts along the way. That gave new oomph to the rally and debate.<\/p>\n

\u201cThe premium is a bullish indicator,\u201d said Michael Kazley, co-founder of Crescent Crypto Asset Management, acknowledging he assumed the contracts would more closely track the cryptocurrency. \u201cIt can be explained by demand for exposure to the price of bitcoin from investors who otherwise cannot or do not want to own actual bitcoins.”<\/p>\n

Others saw the gap as a sign that it may not be possible to marry the virtual currency with the traditional financial industry. When contracts expire, buyers get cash – not bitcoin itself – weakening links to the underlying asset. The worry is that derivatives will act too independently.<\/p>\n

\u201cThe futures market opening was a mild disaster in many respects,\u201d said Aaron Brown, a former managing director at AQR Capital Management who invests in the cryptocurrency\u00a0and writes for Bloomberg Prophets.<\/p>\n

\u201cIt was supposed to mimic the price of the physical, it wasn\u2019t supposed to hit limit triggers twice.\u201d<\/p>\n

Wall Street trading desks have been yearning for more volatility in many asset classes this year, so they can make more money handling client transactions.<\/p>\n

Bitcoin may be too volatile. An industry group made up of big banks, brokers and traders said last week it was concerned that the cryptocurrency\u2019s volatility could lead investors to default on contracts if prices swing hard.<\/p>\n

Some of the world\u2019s largest banks maintained their cautious stance on Monday. Firms including JPMorgan Chase & Co, Citigroup Inc and Morgan Stanley are continuing to evaluate whether they\u2019ll offer clearing of the futures, according to people with knowledge of their deliberations.<\/p>\n

Cboe launched bitcoin futures at 6p.m. New York time on Sunday.\u00a0During the first hour, traffic on its website was so heavy that it caused delays and temporary outages, without interfering with trading systems.<\/p>\n

CME Group Inc, the world\u2019s biggest exchange owner, is set to launch similar products on Dec. 18.<\/p>\n

More Products<\/h3>\n

The futures trading legitimizes bitcoin to some degree, said Kevin Grimes, president of Westborough, Massachusetts-based Grimes & Co. It allows more institutional money to flow in, while giving firms a way to hedge positions.<\/p>\n

The price gap shows people are seeking exposure to bitcoin without buying it directly, he said.<\/p>\n

\u201cSo in the short run that could change the supply and demand a little bit,\u201d he said.<\/p>\n

\u201cBut in the grand scheme of things it probably is a good thing for bitcoin structurally, because it will allow for larger amounts of institutional money to more comfortably buy positions.\u201d<\/p>\n

The new futures will probably help create a more regulated and steady underlying market, paving the way for more additional products, hedge fund lawyer Stephen Bielecki of Kleinberg, Kaplan, Wolff & Cohen wrote in a note Monday.<\/p>\n

\u201cMany anticipate\u201d that the Securities and Exchange Commission will eventually approve an exchange-traded fund tied to bitcoin, he said.<\/p>\n

For its part, bitcoin rose\u00a09.6% to $17,148 on Monday – a roughly 17-fold advance this year.<\/p>\n

\u201cOur view on bitcoin is unchanged,\u201d said Tim Ng, chief investment officer of Clearbrook Global Advisors. \u201cThe valuation has no basis, as there are no assets to back it, nor does it have the faith and full credit of a recognized entity such as a central bank. This has been a one-way street with people putting in money, and no one coming out. \u201d<\/p>\n

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Read: Bitcoin futures start with a bang<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Bitcoin\u2019s triumphant debut on Wall Street hasn\u2019t ended the financial industry\u2019s skepticism.<\/p>\n","protected":false},"author":59,"featured_media":207025,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[961],"tags":[5537],"class_list":["post-215951","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\/215951","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=215951"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/215951\/revisions"}],"predecessor-version":[{"id":215967,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/215951\/revisions\/215967"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/207025"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=215951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=215951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=215951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}