Bitcoin Takes Bigger Wall Street Stage With Smooth CME Debut

Bitcoin futures started trading Sunday night at CME’s venue, a week after Chicago rival Cboe Global Markets introduced similar derivatives on the volatile cryptocurrency, according to Bloomberg. CME is a much bigger player in futures, so many traders expect it to make a bigger splash in the nascent space.

CME got off to a faster start with more efficient pricing. Its most-active contract changed hands 221 times in the first hour versus 570 during Cboe’s debut. But that’s a win because CME’s contracts are five times more valuable, they’re tied to five bitcoins compared with only one with Cboe’s futures. And CME’s futures were priced only about 2 percent higher than bitcoin itself; in the first day, Cboe’s got as much as 13 percent above, a sign trading was relatively inefficient.

Bitcoin surged toward $20,000 in the minutes before trading began at CME, before paring gains. It was priced at $18,336 as CME’s contract fetched $18,610 at 8:19 p.m. New York time. The CME and Cboe bitcoin futures have some distinct features. The price of Cboe’s product is derived from the cryptocurrency’s price at a single exchange; CME’s is based off four.

The CME futures are another step into the mainstream financial world for an asset created in the wake of the 2008 financial crisis as an alternative to banks and government-issued currencies. The contracts, which settle in dollars and trade on regulated exchanges, can be bought by institutional investors that are prohibited from buying bitcoin directly on largely unregulated exchanges.

To protect against wild, mistaken price swings, CME will briefly pause trading if the contracts rise or fall 7 percent or 13 percent, and prices won’t be allowed to move more than 20 percent. Cboe also has volatility halts, which were triggered in the initial hours of trading a week ago, and its January contract rose as much as 26 percent on the first day.