As expected Bitcoin went on a bit of a roll up the chart leading up to the launch of CME Group’s futures contracts on Sunday. Being a much larger exchange it was predicted that this would have a bigger effect on the market than last week’s CBOE offerings. The king of crypto inched up to just over $20k just before the trading doors were opened at CME.
According to Coinmarketcap.com BTC reached $20,089 at 12.19 UTC on December 17. It has since corrected back to around $19,100 where it is currently trading with a 24-hour volume of $13.1 billion. There was a little less volatility and a little smoother ride for CME, their website stayed up for a start. Pricing was another factor that was more streamlined as the contracts are based on prices from four different exchanges unlike CBOE’s which are only based on the one.
CME priced their contracts just 2% off the actual Bitcoin price which made them more efficient and more attractive as investments. CBOE conversely had quite a price disparity of around 13% when their futures were launched last Sunday. According to sources and data from the CME website, more than 200 one month contracts were sold during the first hour of trading. People seemed better prepared this time around and they knew how they were going to hedge their positions.
The value of the contracts also differs with CME’s being five times more since they are based on 5 Bitcoin’s compared to just one at CBOE. Coindesk claims that the contracts are still priced at a premium when looking at the actual price of BTC. They are more secure as traders do not actually own the Bitcoin so are not subject to these wild fluctuations.
Volatility protection is in place with larger exchanges and CME stated they will suspend trading if the contracts rise or fall 7% or 13%, prices won’t be allowed to move more than 20%. Institutional traders will be more attracted to this type of investing, buying and selling off crypto charts is not for the faint-hearted, though ‘hodlers’ can usually handle it.
More recognition for Bitcoin and its brethren will be awarded from the news that major regulated exchanges are getting into the crypto markets. With Nasdaq and Wall Street’s Cantor Fitzgerald looking to launch Bitcoin-based products in 2018 long may the crypto mania continue.