Bitcoin futures began trading on Sunday. In a maniacal market like the one for bitcoin has become, no one is sure what to expect. On the first day, the contract’s trading became so volatile that its trading was halted twice. Web traffic was so heavy that the CBOE website was slow or unavailable at times. While many are cheering the potential of these futures contracts, others are worried about threats to bitcoin and the cryptocurrency’s market stability. Alexander Osipovich and Gabriel T. Rubin report:
The launch of the bitcoin futures represents a milestone for the digital currency. But the new market could be roiled by hacks, technical snafus or manipulation schemes.
One risk, critics say, is that the underlying markets for bitcoin are largely unregulated and have a troubled history. Mt. Gox, once the largest bitcoin exchange, collapsed in 2014 after being robbed of more than $470 million of bitcoin. Other bitcoin exchanges have faced criminal charges of money laundering.
“The Bitcoin cash markets are immature and hardly seem the epitome of robustness,” Craig Pirrong, a finance professor at the University of Houston, wrote in a blog post.
Bitcoin has been the best-performing asset in financial markets in 2017. The launch of bitcoin futures comes as a confluence of economic, financial and cultural developments has spurred a rise of more than 1,500% this year in the price of the digital currency.
But the futures’ launch has cast a spotlight on the market’s shaky foundations. Bitcoin exchanges were plagued with glitches in recent weeks, even as the price of the virtual currency soared to records—passing $17,000 on Thursday, from just $968.23 at the start of the year, according to CoinDesk.
For their futures products, Cboe and CME are betting that a handful of bitcoin exchanges are sufficiently reliable and trustworthy to support a derivatives market.
Still, recent mishaps have raised questions about whether bitcoin exchanges are ready for prime time. On Nov. 29, heavy trading sparked by bitcoin breaking through $10,000 the previous evening caused outages at Bitstamp and GDAX, among other exchanges.
All five bitcoin exchanges working with Cboe or CME have taken steps to embrace regulation and anti-money-laundering laws. Their representatives said the industry had matured. “Exchanges that weren’t up to a certain standard, due to incompetence, have died out,” said Bitstamp Chief Executive Nejc Kodrič.
Some critics warn that unscrupulous traders could push around the price of bitcoin on the bitcoin exchanges, manipulating prices in the underlying market to reap profits from the futures.
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