11 things you need to know about Bitcoin following its futures trading debut
CBOE Global Markets pioneered the Bitcoin derivatives market on Sunday ahead of much bigger rival CME Group.
Futures trading for the cryptocurrency comes at a time of price volatility, last week going from approximately $13,000 to the $19,000 mark with ease and very quickly back to 14,000.
before trading it as a derivative.
aftera furious day of trading, here are 11 things you need to know following its derivatives debut on CBOE.
1- Bet that Bitcoin sells $2500 more in Jan 2018 than today
According to the Financial Times (FT), the January 2018-expiry Bitcoin futures were $18,740 per digital currency compared with a price of about $16,250 today, up from an opening price of $15,000, with almost 2,700 contracts changing hands.
2- Volumes are low on CBOE
“Volume is not going to be very high. It was a very short notice period and not all [market participants] can turn around quickly,” Max Boonen, founder of B2C2, a UK cryptocurrency broker, told FT. Cboe’s futures exchange traded only 300,000 contracts a day in November compared to CME’s average of 9.3 million contracts daily.
3- Margin calls set higher
CBOE’s clearing house, the OCC, has imposed an initial margin of 44 per cent, the amount of the trade price they must pay upfront to backstop the trade. It only required 33 per cent a week ago.
4- Further gains predicted
Valentin Marinov, head of G-10 FX research at Credit Agricole CIB predicted further gains for the cryptocurrency before the end of the year, according to CNBC on Monday: “Bitcoin is soaring because of the inherent imbalance between demand and supply. Supply is inherently fixed; it’s very much like gold if you wish? At the same time… demand is based on hopes that its value will continue to grow, with hope among investors that the digital currency’s value appears to be “unlimited”.
5- Bitcoin described as fraud, dangerous
JPMorgan Chase CEO Jamie Dimon called bitcoin a “fraud” that would eventually blow up, while billionaire investor Warren Buffett urged traders to “stay away from it,” calling the rally a “mirage”. CNBC reported Stefan Ingves, chairman of global regulators at the Basel Committee and governor of Sweden’s Riksbank as saying that investing in bitcoin or other similar digital currencies was a “dangerous” prospect
6- Bitcoin gaining popularity
The Guardian reported Daniele Bianchi, assistant professor of finance at Warwick Business School, as saying Bitcoin is “gaining more and more legitimacy as an asset class”. “Today’s launch of Bitcoin futures… has the potential to add further momentum and thus increase the appeal of the cryptocurrency to both institutional and retail investors.
7- 1500% Bitcoin surge since early 2017 and valued reaches $274bn
At current values, Bitcoin has surged by over 1,500% since the start of 2017 when it traded at around $1000. The combined value of every Bitcoin currently in existence is around $274bn, according to Thompson Reuters.
8- A Bitcoin crash is not worrisome except if heavily hedged against
Research consultancy Capital Economics said that if Bitcoin values flattened out, the paper losses would be equivalent to a 0.6% fall in US equity prices, as most investors have bought Bitcoin at much lower prices. But a major correction could be harmful if people have borrowed heavily to buy Bitcoin.
9- Regulations playing catch-up
South Korea’s finance minister is looking at subjecting Bitcoin trading to new regulation. Meanwhile, according to the Guardian, the UK and other EU governments are planning a crackdown on Bitcoin amid concerns that it is being used for money laundering and tax evasion.
10- Bubble talks
According to the Guardian, UBS analyst Paul Donovan said previous bubbles have lasted longer than critics have expected. “UBS believes cryptocurrencies are a bubble. However, being able to short a bubble does not make the bubble burst at once. Bubbles are by definition irrational. Predicting when a bubble will burst cannot use rational analysis. Ignoring a bubble is the best course of action,” he said.
The Reserve Bank of New Zealand’s acting governor Grant Spencer warned: “It looks remarkably like a bubble forming to me,” as reported by the Gaurdian.
11- True value to avail itself soon
Bitcoin’s true value was left unchecked but now that investors are able to bet against it with derivative contracts, its true value will soon be clearer. Ophir Gottlieb, chief executive officer of Los Angeles-based Capital Market Laboratories, said Bitcoin futures trading will take a few days to calm down.