Bitcoin valuations leaps as derivatives go on sale in the US

Bitcoin valuations leaps as derivatives go on sale in the US

Bitcoin valuations leaps as derivatives go on sale in the US

On Thursday, the price of bitcoin topped $16,000 after similar run-ups pushed the value of the currency past the $14,000 and $15,000-mark. We also have reports saying that there have been some very strong volumes in this market since its open which should lead to some volatility in the prices.

The price of bitcoin swung wildly Thursday, rising to more than $19,000 only to fall sharply within minutes, as the frenzy surrounding the virtual currency escalated just days before it starts trading on a major USA exchange. The futures contracts were trading at $16,000 soon after the market went live, higher than where bitcoin is trading in the spot market at the time of print.

"Even if there is an institution or institutional-sized trader out there, they are going to want to make sure that the mechanics work first, just for the futures", said Ophir Gottlieb, chief executive officer of Los Angeles-based Capital Market Laboratories. After making a journey towards the $500 region, we are now seeing the prices back below the $450 region and it looks as though this consolidation and ranging would continue. Somebody who invested $1,000 in bitcoin at the start of 2013 and had never sold any of it would now be sitting on around $1.2 million.

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The launch of bitcoin futures trading on a regulated exchange is seen as a historic move due to the brand-new nature of the cryptocurrency.

The two launches were made possible after a key USA regulator, the Commodities and Futures Trading Commission (CFTC), gave the green light to the exchanges on December 1, while warning "of the potentially high level of volatility and risk in trading these contracts".

Futures for bitcoin will start trading on the Chicago Board Options Exchange on Sunday evening and on the Chicago Mercantile Exchange a week later. Now an hour after launching the actual price of bitcoin is still up, trading around $15,350. Bank of America will not allow clients access to the futures. This person requested anonymity because the decision hasn't yet been disclosed publicly.

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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". "To promote this, we will initially offer bitcoin futures for free". The futures will allow for the shorting of bitcoin - that is betting that the price of bitcoin will go down - which presently is very hard to near impossible to do. They are basically lines of computer code that are digitally signed each time they are traded.

That's why investors who were keen on buying gold five or 10 years ago, are now eager to load up on bitcoin, and sales of the once-popular American Eagle gold coins have slumped to their lowest level in a decade.

A debate is raging on the merits of such currencies.

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