NEW YORK – The price of bitcoin swung wildly Thursday, rising to more than $19,000 only to fall sharply within minutes, as both the euphoria and anxiety surrounding the virtual currency escalated just days before it starts trading on a major U.S. exchange.
At 3:25 p.m., bitcoin was valued at $15,930, according to Coinbase, after briefly surging above $19,000 Thursday morning. At the start of the year, one bitcoin was worth less than $1,000.
The swings in price occurred as the trading community prepares for bitcoin to start trading on two established U.S. exchanges. Futures for bitcoin will start trading on the Chicago Board Options Exchange on Sunday evening and on the Chicago Mercantile Exchange a week later.
Yet the onset of futures trading has parts of Wall Street concerned.
A group of banks came out and complained that federal regulators approved the futures, which begin trading Sunday, too quickly and without properly considering the risks inherent in bitcoin. The futures signal more mainstream acceptance of the currency, but also open up bitcoin to additional market forces.
Futures allow for the shorting of bitcoin – that is betting that the price of bitcoin will go down – which presently is very difficult to near impossible to do. With the currency’s tremendous run up in price in recent days, it could become a target for those who doubt that it deserves its current lofty value.
The Futures Industry Association, which represents Wall Street’s biggest banks and clearinghouses, sent a letter to the Commodities Futures Trading Commission, saying that as the guarantors of customers’ trades, they should have been consulted before trading in bitcoin futures was approved. They expressed concern that the extreme volatility tied into bitcoin could leave clearinghouses exposed when the futures move too violently.