BITCOIN surged past US$18,000 after making its debut on a major global exchange but was trading lower yesterday, highlighting the volatility of the controversial digital currency that has some investors excited but others nervous.
Trading on a futures contract began at 6:00pm on the Chicago board options exchange at US$15,000.
Heavy traffic made the Cboe website inaccessible in the first 20 minutes, but it said that “trading runs on very separate systems and was totally unaffected by the website issues.”
Around 1000 GMT yesterday, Bitcoin was trading at US$17,600 per unit for the futures contract expiring on January 17 after reaching a high of US$18,850, according to Cboe’s website, meaning it exceeded the highest value reached on alternative non-regulated Internet platforms.
Futures expiring on February 14 and March 14 were higher, trading at US$19,140 and US$19,100 respectively at the same time yesterday.
A futures contract is a financial product that allows investors to bet on whether the currency’s price will rise or fall.
Bob Fitzsimmons, a futures manager at Wedbush Securities, described the opening as “quiet and steady,” as Cboe data showed around a thousand trades were made in the first two hours.
The Cboe debut is expected to be followed a week later by a rival listing on Chicago Mercantile Exchange.
It marks the first opportunity for professional traders to invest in Bitcoin on a traditional platform, even as some steer away because of a lack of regulations surrounding the currency.
“It gives it legitimacy. It recognizes that it’s an asset you can trade,” said Nick Colas, of Data Trek research.
Among those cheering the launch are the Winklevoss twins, who have been called the first Bitcoin billionaires. Critics include financial commentator Jim Cramer, who warns that prices could tumble once the new trading venues open the door to “short sellers,” who bet on downward moves in assets.
The two launches were made possible after a key US regulator, the Commodities and Futures Trading Commission, 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.”
Anticipation of the first mainstream listings for the digital currency has been a catalyst for a sharp price increase in recent weeks. Bitcoin opened 2017 at around US$1,000, surged past US$10,000 for the first time last month and soared as high as US$16,777 on Thursday before retreating somewhat.
The actual opening of the Cboe market, an electronic trading venue, was a low-key affair, lacking the pomp of an initial public offering, which is often marked by the new entrant ringing the bell of the New York Stock Exchange.
The embrace by mainstream exchanges of Bitcoin futures marks a sea change from the days when the digital currency was associated with drug dealing and other illicit activities.
Cboe said it has taken precautions to address wild fluctuations: trading will be suspended for two minutes if Bitcoin prices go up or down 10 percent, for instance.
“We are committed to continue to work closely with the CFTC to monitor trading and foster the growth of a transparent, liquid and fair Bitcoin futures market,” Cboe said.