On Thursday, bitcoin soared to $19,000, fell back to $16,000, and then went up and down before hitting the $17,000 mark. And all these in only one day. The increased volatility occurred just days before a U.S. exchange will include bitcoin futures.
Several banks said the would limit their clients’ possibility of trading futures next week because of volatility.
On Friday, the cryptocurrency’s value fell to $15,431, Coinbase reported. In January 2017, the price of one digital coin was less than $1,000. Experts explained that the abrupt changes in the value suggest the community is preparing for the bitcoin futures, which will be available on the Chicago Board Options Exchange starting Sunday and on the Chicago Mercantile Exchange several days later.
Futures Trading Could Make Bitcoin even More Volatile
Futures mean that investors can speculate on the price of the cryptocurrency even though they do not have any virtual coins in their portfolio. Experts warn that the cryptocurrency is already highly speculative.
Wall Street is also concerned. Several major banks voiced concerns over the currency’s volatility. The Futures Industry Association, which represents some of these banks, told the Commodities Futures Trading Commission the banks should have been asked for an opinion before bitcoin futures made it into the market. The association is concerned its clients would lose large sums of money because of the added volatility.
- Goldman Sachs announced that only a few clients will be allowed to trade bitcoin futures on the CBOE.
- Bank of America banned the futures altogether.
- JPMorgan Chase will limit clients’ access to the futures on Sunday and issue an evaluation after an analysis of the trading that day.
- Citigroup will also ban the futures, a source told the Wall Street Journal. The bank declined to comment and so did Morgan Stanley.
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