Tuesday, January 31, 2023

Bitcoin Passes First Test in the Futures Era. What Now?

Bitcoin Passes First Test in the Futures Era. What Now?

Sunday 10th December 2017 was a historic day for Bitcoin — CBOE, the first mainstream market to launch a BTC-based investment product, began trading “Bitcoin Futures”. The big question now is: where does Bitcoin go from here — to the moon, the potato, or nowhere at all?

Also read: Which Bitcoin Wallet Is Best? Desktop Choices

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Bitcoin Futures Crashes CBOE Site, Doesn’t Stop Demand

CBOE’s site became unavailable soon after Bitcoin Futures went live at 5:00PM Chicago time on the 10th, due to heavy traffic. CBOE said the site delays had “no impact on trading activity”. The exchange traded over 800 contracts in the first two hours after launch.

However CNBC reported there were “at least two trading halts due to rapid price gains”. The futures (tag: XBT) had climbed 10 percent in price in the first couple of hours, triggering the five-minute automatic stoppages. The stoppages were part of the CBOE system’s automated response to volatility and not errors or problems.

By 11:18PM ET (10:18PM Chicago) the XBT (futures) price was at $18,490.

The immediate response from “regular” bitcoin trading platforms was positive. BTC recovered its (slightly) dented mojo and shot up to $16,870 USD by press time. Notably, however, nearly all well-known digital assets experienced a similar boost. Bitcoin cash (BCH), litecoin (LTC) and even bitcoin gold (BTG) had double-digit percentage gains from the day before.

That exuberance is despite Bitcoin Futures not even being a contract to receive BTC. They’re settled in USD depending on the bitcoin price at completion. Ironically, the factor that propels bitcoin into the financial mainstream is not even a blockchain product, but a straight-out bet on its future value.

CBOE’s contracts are based on the BTC auction price on the Winklevoss brothers’ Gemini exchange. Each contract is for one bitcoin value — and they’re available in weekly, “serial” monthly contracts and “quarterly” three-monthly varieties.

So What Does This Mean for Bitcoin?

There were mixed predictions for what bitcoin’s big-finance debut might mean — and in many ways, it’s still uncertain. Sunday night’s trading was just a dress rehearsal, before the main event starts Monday morning.

Bitcoin’s volatility would be a disaster on a futures market, some said, with unforeseen consequences. Others wondered if it might actually stabilize the price over time. In the end, Sunday night was generally good news for bitcoin and that may bode well for the coming days.

Most agreed that mainstream attention would change bitcoin forever — one way or another. Already there are signs it’s here to stay as a commodity, if not the spending currency it was originally intended to be.

As an example, Reddit user “Amerabian” posted a scan from a major newspaper in Saudi Arabia, showing bitcoin listed right next to gold and crude oil:

Bitcoin Saudi paper futures


Bitcoin derivatives have already traded for years, on exchanges like BitMEX. But still, in the eyes of the mainstream media and finance community, it wasn’t “legitimized” until well-known players like CBOE gave their explicit stamp of approval.

CME, which announced first before being beaten to the punch by CBOE, will start trading its own bitcoin futures based on the “Bitcoin Reference Rate (BRR) on December 18th. If things go well over the coming week, that would be even bigger news.

What does futures trading mean for bitcoin and especially its price? Let’s hear your thoughts.

Images via Reddit, Pixabay

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