Sunday, December 10, marked a new era for bitcoin: the currency made its debut on the Chicago Board Options Exchange (CBOE). With this event, bitcoin futures are being traded on Wall Street.
What is bitcoin? It’s a “cryptocurrency” created around 2008 or 2009 by an anonymous person or a group calling itself Satoshi Nakamoto. All transactions are completed without banks and with anonymity. The currency has no ties to any particular country, making it attractive for international payments. Rather than keeping bitcoins in a bank, users have a digital wallet. All transactions made with bitcoin use the wallet ID in place of personal information. Since bitcoin wallets are not insured by the Federal Deposit Insurance Corporation (FDIC), there’s no protection for bitcoin losses.
When bitcoin trading began, interest was so heavy that CBOE’s website slowed to a crawl and then became completely unavailable. Despite this, CBOE claims that trading itself wasn’t affected.
Trading led to a steep spike in bitcoin’s value. It rose by nearly 22 percent, breaking $18,000 at one point. Some traders warn that this is the sign of a bubble about to break. However, others point to a growing mainstream interest in bitcoins as an indication that the bust might not occur for some time.
In late December, the Chicago Mercantile Exchange (CME) will start trading bitcoin futures as well. Unlike the CBOE, which bases its value on prices set by Gemini Trust Company, the CME plans to use a variety of sources for valuation.
With its move onto the futures exchange and its current value at $259 billion, bitcoin has come under even more scrutiny because of its unregulated status. With no ability to tax or control the currency, many governments around the world — those in Japan and Australia, for example — are weighing their options for how best to deal with it.