Bitcoin takes bigger Wall Street stage with smooth CME debut
The world’s biggest exchange just joined the bitcoin revolution.
Bitcoin futures started trading Sunday night at CME Group’s venue, a week after Chicago rival Cboe Global Markets Inc. introduced similar derivatives on the volatile cryptocurrency. CME is a much bigger player in futures, so many traders expected it to make a bigger splash in the nascent space.
CME got off to a faster start with more efficient pricing. Its most-active contract changed hands 221 times in the first hour versus 570 during Cboe’s debut. But that’s a win because CME’s contracts are five times more valuable — they’re tied to five bitcoins compared with only one with Cboe’s futures.
“People were better prepared” for the start of trading at CME, said Bobby Cho, head of trading at Cumberland, the cryptocurrency trading unit of DRW Holdings. “They knew how they were going to hedge their positions.”
CME’s futures traded about 2 percent above bitcoin itself as of 8:05 a.m. in London; in the first day, Cboe’s got as much as 13 percent above, a sign trading was relatively inefficient. Bitcoin hovered close to $18,860, after retreating from a record $19,511 earlier Monday.
The CME and Cboe bitcoin futures have some distinct features. The price of Cboe’s product is derived from the cryptocurrency’s price at a single exchange; CME’s is based off four.
“We were waiting for the launch of the CME futures because the price is more robust and the exchange trades much larger volumes,” Jose Miguel Nascimento, head trader at cryptocurrency fund Solidus Capital, said in a telephone interview. “Futures are a very positive development for the bitcoin market, as it will help everyone from miners to traders hedge risk.”
The CME futures are another step into the mainstream financial world for an asset created in the wake of the 2008 financial crisis as an alternative to banks and government-issued currencies. The contracts, which settle in dollars and trade on regulated exchanges, can be bought by institutional investors that are prohibited from buying bitcoin directly on largely unregulated exchanges.