Bitcoin drops after dramatic gains ahead of futures launch
LONDON (Reuters) — Bitcoin lost almost a fifth of its value in 10 hours on Friday, having surged more than 40 percent in the preceding 48 hours, sparking fears that the market may be heading for a price collapse.
In a hectic day on Thursday, bitcoin leapt from below $16,000 to $19,500 in less than an hour on the United States-based Global Digital Asset Exchange (GDAX), one of the biggest exchanges globally, while it was still changing hands at about $15,900 on the Luxembourgbased Bitstamp.
Some market watchers attributed the lurch higher to the coming launch of bitcoin futures on major exchanges. Having then climbed to $16,666 on Bitstamp at around 0200 GMT on Friday, it tumbled to $13,482 by around 1200 GMT — a slide of more than 19 percent. It was last down 8.2 percent at $15,232.32 on Bitstamp.
The Chicago-based Cboe Global Markets exchange is due to launch today a futures contract on the digital currency, to be followed by the CME Group the next week.
Craig Erlam, senior market analyst at OANDA in London, said investors may have taken profits on bitcoin gains ahead of the Cboe launch, which could open the door to short speculators who believe the price has risen far too quickly.
“The initial bounce after this morning’s sell-off suggests there’s still appetite for buying dips but that may not last if we don’t see the kind of rebound witnessed previously,” Erlam said.
“Saying that, the way bitcoin is trading at the minute, I don’t think anyone would be surprised to see it end the day in the green,” he added.
As investors braced for the Cboe launch, some big US banks including JPMorgan Chase and Citigroup, will not immediately clear bitcoin trades for clients once investors start trading futures contracts, the Financial Times reported on Friday, citing people familiar with the matter. JPMorgan and Citigroup did not immediately respond to requests for comment.
On Thursday, Goldman Sachs Group Inc. said it planned to clear bitcoin futures for some clients as the new contracts go live on exchanges in the coming days.