Cboe Discontinues Bitcoin Futures Trading

The Chicago Board Options Exchange (Cboe), which had introduced bitcoin futures contract trading in 2017, is discontinuing the cryptocurrency’s contracts for March. There is also a possibility that the exchange may completely discontinue bitcoin futures contract trading altogether.

In an update yesterday, the exchange stated that it was “assessing its approach its approach with respect to how it plans to continue to offer digital asset derivatives for trading.” As of this writing, three bitcoin futures contracts are available for trading at Cboe, with the final one expiring on 19th June.

The Cboe beat Chicago Mercantile Exchange (CME) in listing bitcoin futures on its exchange. At that time, the exchange claimed that it was introducing the contracts in response to customer demand and inquiries.

Those inquiries have not translated into tangible volume numbers. Dec 11, 2017 was the first day of trading at the exchange and it ended with 4,127 contracts being traded. But those numbers were at the peak of crypto mania in December 2017, when bitcoin’s price touched an all-time high.

The cryptocurrency markets have been in a funk since the beginning of last year. Prominent coins, such as bitcoin and ethereum, lost more than 80% of their value last year in the wake of scandals and hacks. The trading volume at Cboe futures mirrors the decline in cryptocurrency markets: There are only 265 buyers for the contracts ending in March and only 17 futures contracts for June settlement are being traded currently.

Some have surmised that Cboe’s decision may have to do with traders preferring rival CME’s bitcoin contracts. According to online publication The Block, Cboe’s contracts consistently generated half the volume of similar contracts at the CME. The publication also points that CME contracts set a record for highest trading volumes with 18,300 contracts. That said, CME’s contract volume for bitcoin futures still pales in comparison to those for established assets.  

Trading for bitcoin futures contracts has not picked up due to several reasons, from an underlying volatility in bitcoin’s price coupled with regulatory uncertainty regarding the status of cryptocurrencies has kept traders and investors away from the asset.

Cboe’s exit from bitcoin futures creates a gap that will likely be filled by upcoming crypto exchanges, such as ErisX and Bakkt. These exchanges have developed specialized infrastructure for crypto trading. They also plan to settle futures contracts with physical delivery of bitcoin, thereby creating another avenue for ownership of the cryptocurrency. Bakkt was expected to launch in December last year. But its launch has been delayed due to regulatory issues.