Bitcoin Just Surged on Futures Trading. Here’s How That Actually Works

Bitcoin futures started Sunday evening on Cboe Global Markets (CBOE), with the cryptocurrency surging. January Bitcoin futures rose 15% to $17, Monday morning after topping $18, at .

In addition to margin, traders must have money in their accounts to pay fees to both the exchange and their broker. The CFE policy is not finalized. Accordingly, the 2 or 5 minute halts could be extended or even shortened if the exchange thought it necessary to protect market integrity.

The First U.S. Bitcoin Futures

Bitcoin futures started Sunday evening on Cboe Global Markets (CBOE), with the cryptocurrency surging. January Bitcoin futures rose 15% to $17, Monday morning after topping $18, at .

Because of that and because it originated shortly after Bitcoin's launch in , the BTC ticker remains in use. Learn how to claim your copy here… ]. But when it came time to assign a currency code to Bitcoin, BTC didn't work. It wasn't a conflict with Bhutan's currency, the ngultrum, which uses the ticker symbol BTN. Unsurprisingly, Bitcoin also has two symbols to be used like a dollar sign to denote bitcoin amounts in text.

One shown in the photo has double bars running through a capital "B," but can't be created from a keyboard. It's one of the dozens of alternative characters built into most standard typefaces. You can find it in the "Symbol" menu in Microsoft Word.

So in , a new Bitcoin ticker symbol was created, XBT, for use specifically as a currency code. The "X" prefix was chosen because Bitcoin is a "supranational" currency, not belonging to any one nation. BTC was too entrenched to fade away, though.

Some sites use both symbols; others prefer one over the other. If you want check the price of Bitcoin against any other currency in a Google search, for example, you use the BTC ticker. But the foreign exchange website XE. But a few, like Kraken, adopted the XBT symbol. So if you're interested in tracking the minute-by-minute adventures of the Bitcoin markets, you'll be better served looking on the Bitcoin exchanges or using the Coindesk website.

And as if that weren't confusing enough, along comes Bitcoin Cash with two more ticker symbols…. This was one group's answer to the growing problem of having more transactions than the Bitcoin network could process. When Bitcoin Cash "forked" from legacy Bitcoin, it became a separate cryptocurrency the required its own ticker symbol. In designing XBT futures, Cboe leveraged its significant product development expertise to design an instrument that allows participants to implement trading strategies in a manner to which they are accustomed.

The single price settlement process gives participants the option of using XBT futures to hedge their exposure in underlying bitcoin or gain exposure to traded bitcoin prices without holding bitcoin. Bitcoin futures based on the Gemini auction prices are traded exclusively at Cboe Futures Exchange. The brokers below are confirmed to offer trading in XBT futures. Unlike security options, CFE futures contracts other than security futures cannot be held in a securities account and are required to be held in a futures account.

CFE security futures contracts may be held in either a futures account or a securities account. It is not an endorsement of the firms listed, and no significance should be attached to a firm's inclusion or omission. CFE has not investigated the background or disciplinary history of any of the firms listed or of any individual broker in connection with providing this list.

The selection of an FCM, broker, or clearing firm involves matters of personal preference. In choosing a firm, an investor should ask questions and take into account such factors as the investor individually regards as important. If these indexes prove robust enough for futures trading and settlement, the thinking is that the SEC will eventually allow them to price a bitcoin ETF.

The futures market, not unlike the stock market, is organized around exchanges. Clearing brokers are members of the exchange, and customers trade through their brokers. Not the customers of many large brokers, which are standing aside to see what happens before they let their customers trade bitcoin futures.

Several brokers, including Bank of America Merrill Lynch and Citigroup, will not allow their customers to trade bitcoin futures just yet, according to Fox Business. Others are reserving the privilege of trading for select clients. All of this calls into question just how much liquidity will be available. Nevertheless, some brokers are embracing bitcoin futures. The bottom line is that, at least initially, trading might be dominated by smaller retail traders, resulting in less liquidity.

This is perhaps the biggest area of concern for traders, exchanges and regulators. Both futures exchanges are taking great pains to ensure a smooth settlement process, with contingency plans if there are market disruptions. Everyone will be closely watching what happens on the expiration dates, the first of which is Wednesday, January Bitcoins trade on over exchanges worldwide, and prices between exchanges can vary widely — especially when the markets are moving fast.

In a separate process, each day, the futures exchanges assign their futures contracts a final closing settlement price for that day. Unlike the monthly settlement, the daily settlement is not directly based on the underlying spot bitcoin exchanges. The final settlement price to be determined when bitcoin contracts expire each month is much more complicated because it needs to be tied to the cash spot market. Figuring out that price can mean the difference between millions of dollars for bitcoin traders.

Brokers are playing it very safe when it comes to bitcoin futures, which will have significantly less leverage than any other futures contract. Some brokers are requiring more. Typically, margin requirements are only a fraction of the full value of the contract, which creates substantial leverage. In this case, the margin is only about 3. This is why many traders lose their shirts in the futures markets. This relatively low leverage is a good thing. In addition to margin, traders must have money in their accounts to pay fees to both the exchange and their broker.