Bitcoin Futures Contracts Expire Tomorrow
The Chicago Board of Exchange (Cboe), enables investors to purchase or sell Bitcoin futures. This lets people or organization purchase bitcoin at only 44% of its price, securing them a leveraged position. But, future contracts also come with an expiration date, making investing in them even riskier.
Contract expiration date on Wednesday
The Cboe has for the time being only four monthly Bitcoin contracts available. The first one to expire will be this Wednesday, in the past week trading between $8,380 at its lowest point to $11,710 at its highest, a fluctuation of 28.4%. The item that generated this volatility was the announcement made by SEC that cryptocurrency trading platforms need to register with the organization.
On the Cboe, Bitcoin’s price closed at $9,257 last Friday. Since Bitcoin cannot be quantified physically, all of its contracts will have to be closed before 2:45 pm on Wednesday or settled should the investors neither purchase nor sell their position. While there are many aspects that influence Bitcoin’s value there may be even more volatility this week, on Wednesday in particular as the contract is nearing its expiration date.
Bitcoin trades 24/7, but the Cboe is only open for trading from Monday to Friday from 8:30 a.m. to 3:15 p.m., Chicago time. These trading hours can sometimes be extended, but they don’t span over the week. For example, if Bitcoin’s price moves on in the weekend up until 5:00 pm an investor won’t be able to get out of their position and close the trade, possibly resulting in them losing a good chunk of their investment. That is why trading Bitcoin futures is even riskier than trading with actual bitcoins.
A real example would be the actions that transpired this weekend. The Cboe last traded Bitcoin for $9,257. But at the moment, bitcoin is currently trading around $9,500 and has been fluctuating between $8,500 to $9,500 over just the past day.
If you add in the leveraged aspect to this price fluctuation, you can get as an investor a high rate of return or lose amount of your investment.
The prices of Bitcoin’s futures for the next two months will be slightly higher than the March price but then June’s is lower than April’s and May’s. From these futures contract prices it seems that the futures market is still struggling to adapt to Bitcoin’s price movement.