This Dec. 8 photo shows the Chicago Board Options Exchange website announcing that bitcoin futures will start trading on the CBOE on Sunday evening, Dec. 10. (AP Photo/Kiichiro Sato)

This Dec. 8 photo shows the Chicago Board Options Exchange website announcing that bitcoin futures will start trading on the CBOE on Sunday evening, Dec. 10. (AP Photo/Kiichiro Sato)

Bitcoin futures make debut on major exchange

The contract that expires in January surged more than $3,000 to $18,010 four hours after trading.

Associated Press

CHICAGO — The first-ever bitcoin future jumped after it began trading Sunday as the increasingly popular virtual currency made its debut on a major U.S. exchange.

The futures contract that expires in January surged more than $3,000 to $18,010 four hours after trading launched on the Chicago Board Options Exchange. The contract opened at $15,000, according to data from the CBOE.

The CBOE futures don’t involve actual bitcoin. They’re securities that will track the price of bitcoin on Gemini, one of the larger bitcoin exchanges.

The start of trading at 5 p.m. CST overwhelmed the CBOE website. “Due to heavy traffic on our website, visitors to www.cboe.com may find that it is performing slower than usual and may at times be temporarily unavailable,” the exchange said in a statement. But it said the trading in the futures had not been disrupted.

Another large futures exchange, the Chicago Mercantile Exchange, will start trading its own futures on Dec. 18 but will use a composite of several bitcoin prices across a handful of exchanges.

The price of a bitcoin has soared since beginning the year below $1,000, hitting a peak of more than $16,858 Dec. 7 on the bitcoin exchange Coindesk. As of 9:10 p.m. CST, it was at $16,405.76 on Coindesk.

Futures are a type of contract in which a buyer and a seller agree on a price for a particular item to be delivered on a certain date in the future, hence the name. Futures are available for nearly every type of security but are most famously used in commodities such as wheat, soy, gold, oil, cocoa and, as dramatized in the Eddie Murphy and Dan Aykroyd movie “Trading Places,” concentrated frozen orange juice.

The futures signal greater mainstream acceptance of bitcoin but also open up bitcoin to additional market forces. The futures will allow investors to bet that bitcoin’s price will go down — a practice known as shorting — which currently is very difficult to do.

There have been other attempts to bring bitcoin investing into the mainstream. Tyler and Cameron Winklevoss, twin brothers who own large amounts of bitcoin, tried to create an exchange-traded fund based on bitcoin, but federal regulators denied their application.

How much actual investor interest there will be in these bitcoin futures is still up in the air. Many larger Wall Street brokerages and clearinghouses, including Goldman Sachs and JPMorgan Chase, are either not allowing customers to trade bitcoin futures or only allowing select clients to do so. Other brokerages are putting restrictions on the amount of margin a trader can use in bitcoin futures, or putting limits on the amount that can be purchased.

The digital currency has had more than its fair share of critics on Wall Street. JPMorgan Chase CEO Jamie Dimon has called bitcoin “a fraud.” Thomas Peterffy, chairman of the broker-dealer Interactive Brokers Group, expressed deep concerns about the trading of bitcoin futures last month, saying “there is no fundamental basis for valuation of Bitcoin and other cryptocurrencies, and they may assume any price from one day to the next.”

Peterffy noted that if bitcoin futures were trading at that time, under the CBOE’s rules those futures likely would experience repeated trading halts because 10 percent or 20 percent moves in bitcoin prices have not been unusual in recent months.

Bitcoin is the world’s most popular virtual currency. Such currencies are not tied to a bank or government and allow users to spend money anonymously. They are basically lines of computer code that are digitally signed each time they are traded.

A debate is raging on the merits of such currencies. Some say they serve merely to facilitate money laundering and illicit, anonymous payments. Others say they can be helpful methods of payment, such as in crisis situations where national currencies have collapsed.

Talk to us

More in Herald Business Journal

Economic Alliance and Lynnwood offer new business grants

The grants are derived from the federal Coronavirus Assistance, Recovery and Economic Security (CARES) Act.

Paine Field gets $5M grant to remedy a CARES Act oversight

Shortchanged earlier, the Snohomish County airport is the recipient of a new federal grant.

Amazon’s buying spree of used planes goes against green pledge

Airlines are being spurred to hasten the retirement of their oldest, fuel-guzzling aircraft.

An update: We’re proud and humbled by our readers’ support

The Daily Herald investigative fund has grown, and now we’re working to expand environmental coverage.

Commentary: The 737 Max debacle won’t be the end of Boeing

The plane may actually be the bright spot in Boeing’s airliners business.

Panel blasts Boeing, FAA for ‘horrific culmination’ of failures

Investigators found that the company had a financial incentive to avoid more pilot training.

Marysville offers another round of CARES Act grants

Funds are available for those who need help paying for housing or business expenses amid COVID-19.

Port again wins millions in grant money for mill site revamp

The Port of Everett successfully reapplied for federal funding after losing $15.5 million last year.

‘Better with Boeing’ campaign aims to keep 787 assembly here

A new marketing effort hopes to persuade the company to keep Dreamliner work in Everett.

737 Max engineer didn’t know details of flight control system

The program’s leaders only assumed pilots would react differently to the triggering of the MCAS.

Everett company faces $230,000 fine for safety violations

State inspectors allege that Chilos Builders exposed workers to hazards at area construction sites.

Unemployment system overwhelmed by users and new claims

The state Employment Security Department couldn’t process all the new information, leaving users frustrated.