Traders Prepare For Launch Of Bitcoin Futures

Traders Prepare For Launch Of Bitcoin Futures

Traders Prepare For Launch Of Bitcoin Futures

Within three hours after its listing of bitcoin futures, the website and online trading platform of the Chicago Board Options Exchange (CBOE) were inaccessible, due to an unexpected spike in demand and volume. Bitcoin is not a physical asset, unlike gold or crude; and - unlike fiat currencies - it is not controlled or backed by central banks.

Many market experts are quite excited about the fact that investors will now have an alternative to bet for or against Bitcoin that is regulated.

"We'll see what goes on here", he said.

This seems sensible - only this weekend, the price of one bitcoin surpassed United States dollars 18,000, and exchanges struggled to cope with demand for the coin.

Those remarks echoed similar ones from JPMorgan Chase (JPM) CEO Jamie Dimon, who in September said that Bitcoin was "worse than tulip bulbs", referring to the speculative craze in Holland in the 1630s that sent the prices of the most exotic tulip bulbs to stratospheric heights, only to have those prices crash a few years later. By comparison, the market value of Wal-Mart Stores Inc (WMT.N) is around US$288 billion. Since the start of October, bitcoin has more than tripled in price. It was last at US$15,299,97.

Some investors said they still see scope for bitcoin to soar even higher.

Traders Prepare For Launch Of Bitcoin Futures

"Transaction fees that are charged to the customer by the Bitcoin network have skyrocketed this year, topping out at close to $20 a transaction last week (compared to roughly $0.20 when we initially enabled Bitcoin)", Steam said.

"Aggressive traders, such as hedge funds and algorithm-driven funds, (will be able) to use this futures market to enter bitcoin trading with high levels of liquidity for aggressive short-selling and knock the prices really low", said Think Markets analyst Naeem Aslam.

The new derivatives contracts should thrust bitcoin more squarely into the realm of regulators, banks and institutional investors.

And while Cboe, CME and Nasdaq offer strictly policed trading environments, the underlying bitcoin market is riddled with exchanges lacking even basic oversight.

The two launches were made possible after a key USA regulator, the Commodities and Futures Trading Commission (CFTC), gave the green light to the exchanges on December 1, while warning "of the potentially high level of volatility and risk in trading these contracts".

Slovenian cryptocurrency mining marketplace NiceHash, which matches people looking to sell processing time on computers in exchange for bitcoin, said on Thursday it had lost about US$64 million worth of bitcoin in a hack of its payment system. Ethereum the second-biggest, was up almost 8 per cent, according to trade website Coinmarketcap.

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