Bitcoin futures top US$18,000 on debut on CBOE as price surges trigger series of trading halts

CBOE website goes down briefly at the start of trade in the virtual currency futures contract

PUBLISHED : Monday, 11 December, 2017, 2:16pm
UPDATED : Monday, 11 December, 2017, 10:47pm

Bitcoin futures surged more than 20 per cent to above US$18,000 as they launched on the CBOE futures exchange on Monday, with huge leaps in price triggering several brief suspensions of trading.

Prices for contracts expiring in January for the virtual currency briefly jumped to US$18,850 on the Chicago exchange, up 26 per cent from their opening level of US$15,000. By 6pm, they were priced at US$18,000.

Trading volume was 2,722 January contracts, 12 for February futures and 47 for March contracts.

Separately, bitcoin prices traded at US$16,586, up 10 per cent from the previous session, according to an index by specialist virtual currency news site CoinDesk that tracks prices from exchanges such as Bitstamp, Coinbase and Bitfinex.

As trading started at 7am Hong Kong time on Monday, CBOE’s website went down briefly.

“Due to heavy traffic on our website, visitors to may find it is performing slower than usual and may at times be temporarily unavailable,” the exchange said in a statement earlier in the day.

After trading started, the so-called circuit breaker, designed to reduce price volatility, was triggered several times. Under CBOE rules, a 10 per cent movement in prices triggers a two-minute trading halt, while a 20 per cent move triggers a five-minute halt.

The bitcoin futures trading on Cboe has been accepted as a legitimate asset class by professional traders, said Stephen Innes, head of trading in Asia-Pacific for Oanda.

“The current euphoria [in bitcoin] and the extreme levels of price volatility offer the brave of heart some excellent speculative opportunities.”

However, he warned bitcoin trading is “a tricky proposition”.

“Risk management should be front and foremost in all strategies,” he said. “There’s nothing worse than chasing the markets only to find yourself the ‘bag holder’ at the wrong side of the range.”

Innes added that it’s hard to predict future trading levels for bitcoin, given the lack of quantified modelling.

With world in grip of bitcoin mania, CBOE overtakes US rival in race to offer futures first

CBOE, the first exchange in the world to launch bitcoin futures trading, bases the price of futures on the auction price from Gemini Trust, a digital currency exchange. The futures trade under the ticker symbol XBT and are cash-settled contracts.

One futures contract is worth one bitcoin, and trading, available 24 hours a day for five days a week, will be free until the end of December.

The CBOE website only provides price quotes and relevant information, and all trading in the futures has to be conducted through brokers.

The CBOE’s bigger rival, CME Group, the parent of Chicago Mercantile Exchange, will also launch bitcoin futures trading on December 18.

CME’s contracts, which are also cash-settled, are based on an index from four bitcoin exchanges – Bitstamp, GDAX, itBit and Kraken.

The contracts will be available for trading on the CME Globex electronic trading platform, and for submission for clearing via CME ClearPort, effective on December 17 for a trade date of December 18, according to CME.