On 14th March 2019, the Chicago Board of Exchange (CBOE) announced that it will be delisting all the bitcoin future derivatives from its futures market, the Cboe Futures Exchange (CFE). In a notice made to the traders, the exchange stated:
CFE is not adding a Cboe Bitcoin (USD) (“XBT”) futures contract for trading in March 2019. CFE is assessing its approach with respect to how it plans to continue to offer digital asset derivatives for trading. While it considers its next steps, CFE does not currently intend to list additional XBT futures contracts for trading. Currently listed XBT futures contracts remain available for trading.
The bitcoin futures contracts are denoted by the symbol “XBT” on the exchange and no more XBT contracts are going to be listed by the exchange. The currently trading futures contracts of bitcoin will remain available until their expiry date arrives in June.
On the other hand, the rival group CME has no plans of delisting bitcoin futures. Although this news rippled through the bitcoin world rapidly, no sudden drop was observed in the price of bitcoin. But why CBOE has decided to delist the derivates of a potential global digital currency? Is it a failure of the asset? Here’s your insight into some behind the scenes activities.
Futures contracts essentially deal with buying or selling any particular financial instrument at a predetermined price at a specific time in the future. One of the possible causes of why CBOE has decided to delist bitcoin futures is linked to its trading volumes. Over the past months, CBOE has been losing to CME in the trading volume war. The trading volumes on CBOE have been much less than CME and in order to save itself from future embarrassment, the exchange might have decided to take this step.
That’s cause Cboe bitcoin futures trading volumes have been getting crushed by CME. pic.twitter.com/4dpi9Tfuwg
— John Todaro (@JohnTodaro1) March 14, 2019
Despite this huge announcement, staunch proponents of bitcoin are still supporting the asset. The announcement also didn’t have much effect on the price of bitcoin as it is showing a bullish trend instead.
Another possible explanation for this step can be the improved volatility that has been shown by the asset lately. As Forbes reported, “the 30-day historical volatility of the BTC/USD pair fell to its lowest level since November 14, data provided by cryptocurrency prime dealer SFOX shows.” Lack of volatility drives traders away from the futures market as the price drops and spikes of the financial assets are not significant resulting in fewer profits. CBOE is already lacking behind in the trading volumes game and this move by CBOE makes sense as the exchange might have wanted to cut off its less utilized area with insignificant market share in order to thrive in the long run.
CBOE entered the bitcoin futures trading arena when the asset was seeing its high back in December of 2017. The exchange expected to get the benefits out of the interest that was being developed among the general public and traders regarding bitcoin. But since then, the asset has only seen a downward road from almost $20,000 to around $4,000 at the time of writing. The bear market of cryptos has prolonged for over a year now. After seeing less movement by bitcoin in terms of its price, many people are leaving the crypto space. CBOE might have decided to pull out of the crypto game early before it collapses even further.
While CBOE delisting bitcoin future derivatives can be perceived as a win of the rival CME group over the exchange, the thing to notice here is the effect of this news on bitcoin’s price which remained stable owing to the maturity that the asset gained in the past couple of years. While some might attribute the CBOE delisting as a failure of the digital asset, these behind the scenes scenarios portray a whole another picture why CBOE might have decided to take this step. Although CBOE has stepped out of the futures market for bitcoin, it might step back in again sometime in the future if the price of the asset spikes up again, the exchange is still assessing its approach for the trading of digital assets derivatives.