Three days before Cboe Global Markets Inc., one of the world’s biggest regulated exchanges, debuts futures on the cryptocurrency, it had one of its wildest sessions ever. On Coinbase Inc.’s GDAX exchange, prices zoomed up to almost $20,000 from $16,000 in only about 90 minutes — then crashed back down. The largest digital currency is still up more than 16-fold this year, trading at 16,126.32 as of 11:52 a.m. in Hong Kong, according to Bloomberg composite pricing.
Coinbase, one of the largest U.S. online exchanges used by investors, temporarily crashed and continued to suffer from service delays. Trezor, a wallet service, tweeted that it’s having “minor issues” with its servers, while Bitfinex, the largest bitcoin exchange in the world, said on Twitter that it has been under a denial of service attack for several days and that it recently got worse.
Cboe and CME Group Inc. last week got permission to offer bitcoin futures. CME’s products launch Dec. 18.
The entrance of Cboe and CME is a watershed for bitcoin because many professional investors have been unwilling to do business on the unregulated platforms where bitcoin currently trades. Cboe and CME are regulated, potentially assuaging those concerns.
Some big traders had just warned about the impending introduction. On Wednesday, the Futures Industry Association — a group of major banks, brokers and traders — said the contracts were rushed without enough consideration of the risks.
The group outlined their concerns in an open letter, questioning whether the exchanges would be able to adequately police market manipulation for bitcoin futures. FIA added that the exchanges didn’t get enough industry feedback on margin levels, trading limits, stress tests, and clearing for the products before bringing them to market.
Laurie Bischel, a spokeswoman for CME, declined to comment.
Cboe worked with the Commodity Futures Trading Commission to design and improve its contracts and “committed to continue to work closely with the CFTC to monitor trading and foster the growth of a transparent, liquid and fair bitcoin futures market,” according to a statement from the company.
Other trading experts have sounded alarm bells on the possibility of manipulation. The thinking goes that because cryptocurrency markets aren’t policed by a central regulator, cheaters could fly under the radar if they try to move the price of bitcoin on exchanges with scant volume.
The CFTC “has strong anti-manipulation rules for futures, but those won’t necessarily protect investors if the bitcoin cash markets are manipulated,” said Ty Gellasch, executive director of the Healthy Markets Association, an investor advocacy group…