SYDNEY, 11 Dec 2017:
The craze for cryptocurrencies entered a new chapter today as bitcoin futures rocketed by one-fifth of their value at a closely-watched launch, while Asian shares climbed amid optimism about global growth.
The front-month bitcoin futures contract XBTc1 on the Chicago-based CBOE Futures Exchange had earlier surged past US$17,000 today – the first day of trading.
The January contract – being the most-traded – opened at US$15,460 in New York yesterday evening, before leaping to a high of US$18,700 during Asian hours – a gain of 21%.
They were last quoted at US$17,550 a premium of more than US$1,600 to the price on Gemini Exchange.
The futures are cash-settled contracts based on the auction price of bitcoin in US dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs Cameron and Tyler Winklevoss.
The cryptocurrency has boasted a gravity-defying 15-fold gain since the start of the year, attracting institutional interest and no small amount of question marks.
Experts had worried that the risks associated with the currency’s Wild West-like nature could overshadow the futures debut, but so far the price action has been unlike the wild swings seen in the past few weeks. Bitcoin tumbled 20% in 10 hours on Friday.
“Even if there is an institution or institutional-sized trader out there, they are going to want to make sure that the mechanics work first, just for the futures,” said Ophir Gottlieb, chief executive officer of Los Angeles-based Capital Market Laboratories.
“I think the excitement will come when the futures market is established. That can take a few days.”
The acting governor of the Reserve Bank of New Zealand yesterday said bitcoin appeared to be a “classic case” of a bubble.
“With a bubble you never know how far it is going to go before it comes around,” Grant Spencer told TVNZ.
Some market participants believe the fallout across other financial assets from a potential bursting of the bubble will be limited.
“Bitcoin’s market capitalization is currently around US$240 billion, which is much smaller, say, than the value of gold outstanding,” said Andrew Kenningham, economist at Capital Economics.
“If the price of bitcoin fell to zero today, 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, the relevant losses would arguably be smaller.”
– Reuters