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Chicago-based derivatives exchange Cboe Global Markets <CBOE.O>
launched the futures late on Sunday, marking the first time
investors could get exposure to the bitcoin market via a large,
regulated exchange.
The one-month bitcoin contract <0#XBT:> opened at 6 p.m. local
time (2300 GMT) on Sunday at $15,460. By late afternoon on
Monday in New York, it was trading at $18,650, roughly 8 percent
above bitcoin's spot price of $16,900 on the Bitstamp exchange
<BTC=BTSP>.
Bitcoin earlier hit a record high of $17,270.
Its steep gains and rapid rise have attracted investors around
the world as well as intense scrutiny from government
regulators, which is the very opposite of what its creators
wanted when it first launched bitcoin more than eight years ago.
"The bitcoin founder should be horrified seeing it rise so
quickly, as any serious focus on it and its recent explosive
move higher will soon end its freedom," said John Taylor Jr,
president and founder of research firm Taylor Global Vision in
New York.
Taylor believes that based on his charts, bitcoin has not yet
peaked, but as soon as the "upmove ends, it will crash."
Given bitcoin has almost tripled in value over the past month,
and was up more than 15 percent on Monday alone, the futures
pricing suggested investors see price increases moderating.
Bitcoin futures were already offered on some unregulated
cryptocurrency exchanges outside the United States, but backers
said the U.S. market debut would confer greater legitimacy on
the volatile cryptocurrency and encourage its wider use.
The CME Group <CME.O> is expected to launch its futures contract
on Dec. 17.
(To view a graphic on Bitcoin's blistering ascent, click
http://tmsnrt.rs/2AeMjHe)
VOLATILITY CONCERNS
Although there are hopes that the futures will draw in new
investors, most fund managers at larger asset managers and
institutional investors said bitcoin remains too volatile and
lacks the fundamentals that give other assets value.
"There's no place for bitcoin in a multi-asset portfolio given
the very high volatility," said Robeco Chief Investment Officer
Lukas Daalder.
The two-month contract was trading at $18,750, an 11 percent
premium over the spot price, while the three-month contract was
changing hands at $18,140, a roughly 12 percent premium.
While modest when compared with bitcoin's 270 percent increase
over the past three months and 230 percent rise in the last two
months, those levels still indicated a lack of large "short"
positions betting against bitcoin.
"Anyone, especially a professional trading outfit, would be
crazy to actually short sell this bull market," said Nick
Spanos, founder of Bitcoin Center NYC. "But just because it
doesn't happen on day one doesn't mean it won't in the future."
Bitcoin was up more than 1,600 percent so far in 2017, having
started the year at less than $1,000.
'MARCH TOWARDS LEGITIMIZATION'
As of early afternoon trading in New York, 3,951 one-month
contracts had changed hands, meaning around $73.1 million had
been notionally traded. That compares with daily trading volumes
of more than $21.5 billion across all cryptocurrencies,
according to trade website Coinmarketcap.
There had been speculation that the futures launch would trigger
more gyrations in the market. But while volatile compared with
traditional currencies or assets, the rise on Monday was
relatively tame for bitcoin.
Bitcoin surged more than 40 percent in 48 hours last week,
before tumbling 20 percent in the following 10 hours.
"(Bitcoin futures) will speed up the march towards
legitimization of an asset class that only a few years ago many
law enforcement agencies would have argued had limited
legitimate reasons for people to use," said Jo Torode, a
financial crime lawyer at Ropes & Gray in London.
The futures are cash-settled contracts, allowing investors
exposure without having to hold any of the cryptocurrency.
The futures are based on the auction price of bitcoin in U.S.
dollars on the Gemini Exchange, which is owned and operated by
virtual currency entrepreneurs and brothers Cameron and Tyler
Winklevoss.
(GRAPHIC: Bitcoin futures suggest growth, but slower -
http://reut.rs/2yfblkV)
DRAMATIC GAINS
Bitcoin was set up in 2008 by an individual or group calling
themselves Satoshi Nakamoto, and was the first digital currency
to successfully use cryptography to keep transactions secure and
hidden, making traditional financial regulation difficult if not
impossible.
Central bankers and critics of the cryptocurrency have been
ringing the alarm bells over its surge in price and other risks
such as whether the opaque market can be used for money
laundering.
"It looks remarkably like a bubble forming to me," the Reserve
Bank of New Zealand's Acting Governor Grant Spencer said on
Sunday.
Somebody who invested $1,000 in bitcoin at the start of 2013
would now be sitting on around $1.2 million.
Heightened excitement ahead of the launch of the Cboe futures
gave an extra kick to the cryptocurrency's scorching run this
year.
The launch has so far received a mixed reception from big U.S.
banks and brokerages.
Several online brokerages, including Charles Schwab Corp
<SCHW.N> and TD Ameritrade Holding Corp <AMTD.O>, did not allow
trading of the new futures immediately.
The Financial Times reported on Friday that JPMorgan Chase & Co
<JPM.N> and Citigroup Inc <C.N> would not immediately clear
bitcoin trades for clients.
Goldman Sachs Group Inc <GS.N> said on Thursday it was planning
to clear such trades for certain clients.
(For an interactive graphic on bitcoin's blistering ascent,
click
http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-MARKETS-BITCOIN/010051YC4E4/index.html)
(Additional reporting by Chuck Mikolajczak and John McCrank in
NEW YORK; Michelle Chen in HONG KONG and Helen Reid in LONDON;
Graphics by Ritvik Carvalho in LONDON and Reuters Graphics team;
Editing by Meredith Mazzilli)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
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