Bitcoin futures soar amid frenzy over virtual currency

Bitcoin has landed on Wall Street.

Futures on the world’s most popular cryptocurrency surged as much as 26 per cent in their debut session on CBOE Global Markets Inc.’s exchange, triggering two temporary trading halts designed to calm the market. Initial volume exceeded dealers’ expectations, while traffic on CBOE’s website was so heavy that it caused delays and temporary outages. The website’s problems had no impact on trading systems, CBOE said. Bitcoin’s spot price rose.

“It is rare that you see something more volatile than bitcoin, but we found it: bitcoin futures,” said Zennon Kapron, managing director of Shanghai-based consulting firm Kapronasia.

The launch of futures on a regulated exchange is a watershed for bitcoin, whose surge this year has captivated everyone from mom-and-pop speculators to Wall Street trading firms. The CBOE contracts, soon to be followed by similar offerings from CME Group and Nasdaq, should make it easier for mainstream investors to bet on the cryptocurrency’s rise or fall.

Bitcoin wagers have until now been mostly limited to venues with little or no oversight, deterring institutional money managers and exposing some users to the risk of hacks and market breakdowns.

Bitcoin futures expiring in January were 22 per cent higher at $18,330 in mid-afternoon trading from an opening level of $15,000, on 3,785 contracts traded.

“It was smooth, and bitcoin traders don’t seem to be put off by futures,” said Craig Erlam, senior market analyst in London at online trading firm Oanda. “There was a fear that short selling would have an adverse impact on price, but we haven’t seen that yet.”

Proponents of regulated bitcoin derivatives say the contracts will increase market transparency and boost liquidity, but skeptics abound.

JPMorgan Chase chief executive officer Jamie Dimon has called bitcoin a “fraud,” while China’s government has cracked down on cryptocurrency exchanges this year.

The Futures Industry Association — a group of major banks, brokers and traders — said this month that contracts in the U.S. were rushed without enough consideration of the risks.

The start of futures trading is an important milestone for bitcoin’s shift from the fringes of finance toward the mainstream, but it could be some time before the cryptocurrency becomes a key part of investor portfolios — if it ever does.