Bitcoin futures began trading on Sunday afternoon and finished today at $18,545 per contract, ending speculation as to the direction of initial trading interest in the contract. For weeks, we’ve heard TV pundits insisting that short sellers were sitting on the sidelines waiting to slam the futures price, and while this most likely is true, current brokerage firms clearing the contract are reportedly requiring even greater margins then required by the CBOE in order to protect themselves from clients defaulting on market positions in the event of a large price move in the spot market.
Already, fears are high that spot market participants will deliberately manipulate Bitcoin prices in order to force futures prices to move aggressively again open positions. While it is clear the the spot Bitcoin markets are rampant with manipulation by the major exchanges and their larger participants, the potential gains for long futures positions should keep well-capitalized participants in the markets and willing to weather any potential volatility.
It remains to be seen how the short side of the market will develop, but I suspect that only the largest players will be able to afford sit on that side of the trade comfortably. And it is clear that, so far, major money is still sitting on the sidelines, given that less than 4,000 futures contracts traded during the first day. This places volumes at the very lowest ranges of US futures contracts. Since some firms are already submitting proposals with the SEC to create ETFs based upon Bitcoin futures, we should be able to see a strong boost in trading interest pending the SEC approval of the funds. Until then, we’ll keep an eye on CBOE futures and look ahead to the launch of CME futures on December 18th.