Bitcoin has taken a step toward legitimacy with the launch of a product on a Chicago exchange that allows investors to take bets on its price in the future. The new contract on the Chicago Board Options Exchange came as the digital currency jumped another 10%, sparking fresh warnings of a speculative bubble after last week’s 40% climb in price. Bitcoin was trading at $16,200 – up 10% on the day – while the new futures contract trading in Chicago showed that traders were expecting the cryptocurrency to be trading at even higher prices in January. The futures contract trading on the CBOE allows traders to take bets – or to protect themselves – on the price of bitcoin next month. It started trading just before midnight (in London) on Sunday at $15,460, hit a high of $18,700 and then dropped back to $17,800. Such was the price volatility when the contract launched that trading had to be halted twice through so-called circuit breakers and the CBOE had to admit that its website was creaking because of the heavy traffic although its trading platform kept working. The launch of the contract on a regulated exchange is regarded as a sign that bitcoin is becoming more mainstream rather than currency associated with technology experts and even criminals. Daniele Bianchi, assistant professor of finance at Warwick Business School, said: “Although it has been thought of as a peer-to-peer payment system, it is evident that bitcoin is gaining more and more legitimacy as an asset class.Today’s launch of bitcoin futures has the potential to add further momentum and thus increase the appeal of the cryptocurrency to both institutional and retail investors.” Volume in the futures contract was low: according to calculations by Breakingviews, it was roughly $50m (£37m), less than 0.5% of actual bitcoins. Bitcoin – created in the aftermath of the financial crisis as a way to avoid using banks – started the year trading at $966 and its meteoric rise this year has led to comparisons with the dotcom bubble in 2000 and the 17th century tulip bubble. 

Source _ Guardian

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