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A new legitimate era for Bitcoin

When Bitcoin was first created in 2009 it was only worth a few cents


Dealing in Bitcoin gets more real as the virtual currency starts trading on its first major global exchange in Chicago. The subsequent buying frenzy prompted skeptics to again warn of a bubble.When Bitcoin was first created in 2009 it was only worth a few cents. Since the beginning of the year though, Bitcoin has seen an amazing 15-fold gain. In another step toward legitimacy, it made its debut on a major global exchange on Sunday after gaining US regulatory approval — a milestone for a controversial digital currency that has no central bank backing and no legal exchange rate.

Trading on a futures contract began at 6pm local time on the Chicago board options exchange (Cboe) at a price of $15,000 (€12,700) and quickly surged past $18,000. Heavy traffic even made the Cboe website inaccessible for the first 20 minutes.

Read more: How do cryptocurrencies like Bitcoin work?

Bob Fitzsimmons, a futures manager at Wedbush Securities described the opening as “quiet” in terms of number of trades, although the flood of visitors to the exchange’s website was enough to bring it down.

By Monday, Bitcoin was trading at $17,600 per unit for the futures contract expiring on January 17, at the same time futures expiring on February 14 and March 14 were higher, trading at $19,140 and $19,100 respectively.

Looking into the futures

A futures contract is a financial product that allows investors to bet on whether a currency’s price will rise or fall and marks the first opportunity for professional traders to invest in the digital currency.

The Chicago exchange said it has taken precautions to address wild fluctuations: trading will be suspended for two minutes if the price goes up or down 10 percent, for instance.

Read more: Bitcoin’s colossal carbon footprint

Several major financial institutions are still studying Bitcoin and not serving as financial intermediaries. This group includes JPMorgan Chase, Bank of America Merrill Lynch, Citigroup, Barclays, Morgan Stanley and Societe Generale.

Of the larger banks, only Goldman Sachs and ABN Amro are serving as intermediaries for the trades, which means that most of the business will be dominated by smaller entities that are typically requiring larger than usual margin requirements — funds set aside as collateral in case of losses.

The Cboe debut is expected to be followed in a week by a rival listing on the Chicago Mercantile Exchange.

tr/aos (Reuters, AFP)

Topics: Bitcoin

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https://www.dailynewsegypt.com/2017/12/11/a-new-legitimate-era-for-bitcoin/
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