https://www.ft.com/content/40a1aa1e-2cc ... da51b8178a Bitcoin futures rally to $2,000 premium over cash market in bumpy debut
6 MINUTES AGO
The crypto craze has hit the futures market, with Monday’s inaugural trading session crashing the exchange’s website and opening up a $2,000 gap with the underlying price in a fresh reminder of the volatile and fractured nature of the way these coins change hands.
In early trade on the CBOE Futures Exchange, the January bitcoin contract traded as high as $18,850 to the dollar, having opened around $15,000. More than 2,500 contracts had traded hands by 1:44am in Chicago (7:44am GMT), according to CBOE data. Trading was halted twice, first for two minutes then for five, after the abrupt rise triggered ‘circuit breakers’ aimed at easing excessive volatility.
Trading was light compared with more established currencies futures. For instance, volume on the December euro-dollar contract traded on the larger CME Group exchange had already reached 26,592. Still, bitcoin futures trading was more active than some market participants had expected. Intense interest caused intermittent outages on the CBOE Global Markets website but did not affect its trade systems.
The sharp rally left bitcoin futures trading significantly above prices quoted on large cash exchanges. On Coinbase, a US venue, one coin could be sold for $16,900, while on the Gemini exchange that CBOE futures settlement is based on, the price was $16,250.
The large spread between the spot and futures markets exchanges highlights the fragile market that often seizes up in times of tumult, and suffers from long execution times that makes it difficult for traders to cash in on arbitrage opportunities.
Underscoring those issues, Coinbase wrote to clients late last week, reminding them that “there may be downtime which can impact your ability to trade,” according to an email received by the Financial Times.
“Despite the sizable and ongoing increases in our technical infrastructure and engineering staff, we wanted to remind customers that access to Coinbase services may become degraded or unavailable during times of significant volatility or volume,” Coinbase wrote.
Last Thursday, the price of bitcoin on Coinbase diverged widely from other markets, shooting to $19,000 from $17,000 in a matter of minutes, before plummeting back below $16,000.
Paul Donovan, chief economist at UBS Wealth Management, said on Monday that the futures trading had added more fervor the the “hysteria”, but warned that bitcoin remains a “highly dangerous store of value”.
“This was a bubble at $6,000 and is a bubble at $16,000,” he said.
Some market participants reckon that increased institutional interest that might come from the launch of futures trading on the CBOE, followed next week by the launch of futures at CME Group, a larger market, will help to tame the intense volatility while others are less certain over whether the ‘Wild West’ mentality will subside.
Nasdaq, the New York exchange operator, for instance, is plotting its own bitcoin futures contract, but it is still gauging the views of industry participants as it develops its plans, according to a person familiar with the company’s thinking.