Yahoo – AFP, Luc OLINGA, December 11, 2017
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| Bitcoin surged after its debut on a major global exchange (AFP Photo/Justin TALLIS) |
New York
(AFP) - Bitcoin surged past $18,000 after making its debut on a major global
exchange but was trading lower on Monday, highlighting the volatility of the
controversial digital currency that has some investors excited but others
nervous.
Trading on
a futures contract began at 6:00 pm (2300 GMT) on the Chicago board options
exchange (Cboe) at a price of $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 on Monday, bitcoin was trading at $17,600 per unit for the futures contract
expiring on January 17 after reaching a high of $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 $19,140 and $19,100
respectively at the same time on Monday.
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 (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."
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
$1,000, surged past $10,000 for the first time last month and soared as high as
$16,777 on Thursday before retreating somewhat.
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Plenty of
key figures in and around markets are taking a cautious approach to
bitcoin,
which has no central bank backing it, and no legal exchange rate (AFP
Photo/PHILIPPE LOPEZ)
|
Going
mainstream
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.
The 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," the Cboe said.
Still,
plenty of key figures in and around markets are taking a cautious approach to
bitcoin, which has no central bank backing it, and no legal exchange rate.
The Futures
Industry Association, which includes some of the world's biggest derivatives
brokerages, criticized the CFTC's move in a letter to the regulator, saying
contracts are being rushed through without properly weighing the risks.
"A
more thorough and considered process would have allowed for a robust public
discussion among clearing member firms, exchanges and clearing houses,"
the association said.
Several
leading financial heavyweights are still studying bitcoin and not serving as
financial intermediaries. This group includes JPMorgan Chase, Bank of America
Merrill Lynch, Citigroup, Barclays, Morgan Stanley and Societe Generale, said
people close to the matter.
Of the
larger banks, only Goldman Sachs and ABN Amro are serving as intermediaries for
the trades. That means most of the terrain will be dominated by smaller
entities that are typically requiring larger than usual margin requirements --
funds set aside as collateral in case of losses.
The Cboe,
for its part, sought to reassure investors.
"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,"
it said in a statement.
Wedbush
Securities has lifted its margin requirements and is only permitting trades
from clients on a "selected" basis, said Fitzsimmons.
"We
are commissioning only the select clients who have experience in
bitcoins," he said.
"Our
risk systems are ready and we have made sure we have our customers and firm
protected by increased margins and increased scrutiny."
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