Bitcoin’s stratospheric rise this week follows the digital currency’s embrace by mainstream trading platforms and is seen by some in finance as normal growing pains often experienced by innovative technologies.
A US regulator has cleared the way for bitcoin futures to trade on major exchanges but warned investors the digital currency is prone to elevated risk and volatility.
Two US exchanges, including the parent of the venerable Chicago Mercantile Exchange and CBOE Futures Exchange, are racing to embrace bitcoins.
The development shows how some big financial players are moving to co-opt the volatile cryptocurrency, rather than trading the actual currency and lure more mainstream investors into the market, even before regulators have agreed on just what bitcoin is.
CME Group Inc.’s contracts will debut December 18. Cboe Global Markets Inc. didn’t announce a start date. Both got the green light Friday after going through a process called self-certification — a pledge to the US Commodity Futures Trading Commission that the products don’t run afoul of the law. Both the major exchanges announced plans to offer bitcoin trading in the next few months. The news pushed bitcoin’s price higher.
After starting the year at around $1,000, bitcoin, which first appeared in 2008, on Wednesday surged as high as $11,434 before promptly falling 15 percent. Near 1900 GMT Thursday, the virtual currency stood at $9,839.
Nasdaq is the latest major financial market to reportedly plan to launch a bitcoin futures exchange next year, although the exact timing is unclear.
The moves are a watershed for Wall Street professionals — including institutional investors and high-speed traders — who’ve been eager to bet on cryptocurrencies and their wild swings but worried about doing so on mostly unregulated markets. The new products are subject to CFTC oversight. CME, Cboe and Cantor Fitzgerald LP’s Cantor Exchange — which is creating another kind of bitcoin derivative, binary options — promised to help the agency surveil the underlying bitcoin market.