Contracts rise from $15,460 to $16,000 in the first hours of trading on the Chicago Board Options Exchange (CBOE)

The first-ever bitcoin future began trading Sunday as the increasingly popular virtual currency made its debut on a major US exchange.

The futures contract that expires in January rose from $15,460 to $16,000 in its first hours of trading on the Chicago Board Options Exchange.

The CBOE futures don’t involve actual bitcoin. They’re securities that will track the price of bitcoin on Gemini, one of the larger bitcoin exchanges.

Q&A What are futures? Show Hide The latest surge of excitement in the world of crypto​​currencies came over the weekend when the Chicago Board Options Exchange launched futures trading for bitcoin for the first time. Futures contracts allow investors to agree to buy a certain amount of a commodity, bond or share at a specific price at a designated time in the future, hence the name. It means investors can bet on whether they believe a particular commodity – in this case bitcoin – will rise or fall by a specified future date. They are generally used in commodity markets to hedge against major fluctuations in prices, such as unexpected weather conditions hitting crops. But they are also well established in equity markets, with trading on individual companies and indices such as the FTSE 100 and S&P 500. There are risks, mainly when investors use debt to finance their futures speculation and their bet goes the wrong way.

The start of trading at 5pm CST overwhelmed the CBOE website. “Due to heavy traffic on our website, visitors to www.cboe.com may find that it is performing slower than usual and may at times be temporarily unavailable,” the exchange said in a statement. But it said the trading in the futures had not been disrupted.

Another large futures exchange, the Chicago Mercantile Exchange, will start trading its own futures on 18 December but will use a composite of several bitcoin prices across a handful of exchanges.

The price of a bitcoin has soared since beginning the year below $1,000, hitting a peak of more than $16,858 on 7 December on the bitcoin exchange Coindesk. As of 6:25pm CST, it was at $15,244 on Coindesk.

Q&A What is bitcoin? Show Hide Bitcoin is the first, and the biggest, 'cryptocurrency' – a decentralised tradeable digital asset. The lack of any central authority oversight is one of the attraction. Cryptocurrencies can be used to send transactions between two parties via the use of private and public keys. These transfers can be done with minimal processing cost, allowing users to avoid the fees charged by traditional financial institutions - as well as the oversight and regulation that entails. This means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it is hard (but not impossible) to trace a bitcoin transaction back to a physical person. The exchange rate has been volatile, making it a risky investment. Whether it is a bad investment is yet to be seen. In practice it has been far more important for the dark economy than it has for most legitimate uses, but with Facebook's announcement that it is launching a new digital currency - Libra - mainstream interest in bitcoin has surged.



Futures are a type of contract in which a buyer and a seller agree on a price for a particular item to be delivered on a certain date in the future, hence the name. Futures are available for nearly every type of security but are most famously used in commodities such as wheat, soy, gold, oil and cocoa.

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The futures signal greater mainstream acceptance of bitcoin but also open up bitcoin to additional market forces. The futures will allow investors to bet that bitcoin’s price will go down — a practice known as shorting — which currently is very difficult to do.

There have been other attempts to bring bitcoin investing into the mainstream. Tyler and Cameron Winklevoss, twin brothers who own large amounts of bitcoin, tried to create an exchange-traded fund based on bitcoin, but federal regulators denied their application.

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How much actual investor interest there will be in these bitcoin futures is still up in the air. Many larger Wall Street brokerages and clearinghouses, including Goldman Sachs and JPMorgan Chase, are either not allowing customers to trade bitcoin futures or only allowing select clients to do so. Other brokerages are putting restrictions on the amount of margin a trader can use in bitcoin futures, or putting limits on the amount that can be purchased.

The digital currency has had more than its fair share of critics on Wall Street. JPMorgan Chase CEO Jamie Dimon has called bitcoin “a fraud.” Thomas Peterffy, chairman of the broker-dealer Interactive Brokers Group, expressed deep concerns about the trading of bitcoin futures last month, saying “there is no fundamental basis for valuation of Bitcoin and other cryptocurrencies, and they may assume any price from one day to the next.”

Peterffy noted that if bitcoin futures were trading at that time, under the CBOE’s rules those futures likely would experience repeated trading halts because 10 percent or 20 percent moves in bitcoin prices have not been unusual in recent months.

Bitcoin is the world’s most popular virtual currency. Such currencies are not tied to a bank or government and allow users to spend money anonymously. They are basically lines of computer code that are digitally signed each time they are traded.

A debate is raging on the merits of such currencies. Some say they serve merely to facilitate money laundering and illicit, anonymous payments. Others say they can be helpful methods of payment, such as in crisis situations where national currencies have collapsed.