Bitcoin futures debuted in Chicago last night, which could make it easier for institutional investors to embrace the digital asset. It was a widely watched event, and the website of the company launching the derivative, Cboe Holdings, was overwhelmed and inaccessible for a time. Even infamous rogue trader Nick Leeson was watching:
Bitcoin futures—which allow traders to speculate on what an asset’s price will be at some later date—surged more than 20% from their launch price, to well over $18,000 for the January contract. At the time of writing, the January contract was trading for around $17,700. While traffic to the Cboe website was heavy, the company said its trading systems were unaffected and that the launch was orderly.
Toby Allen, a partner at Akuna Capital, called it a “very bullish open.” Two circuit breakers were triggered and more contracts changed hands than expected for a brand new product, said Allen, whose trading firm was posting bids and offers for the bitcoin futures. Circuit breakers are meant to slow or pause trading when price movements are excessive.
The trading so far suggests that futures traders expect bitcoin’s wild rally to continue—although trading for February and March settlement is thin, prices are above $19,000. Earlier this month, Edward Tilly, CEO of Cboe, told Quartz that some of the early users of bitcoin futures are likely to be sophisticated individual traders and cryptocurrency dealers who until now couldn’t effectively hedge their positions. Others have suggested that bitcoin miners who incur massive electricity bills could use futures to hedge their costs.
Cboe’s bitcoin futures launch is a first step in bringing bitcoin into the financial mainstream, but it will take time to know whether its contracts catch on. And the exchange will soon have to compete with a rival contract from CME Group.