New York Exchange ICE: Bitcoin Futures On Hold for Now

As CME and CBOE are competing to launch Bitcoin futures by year end, New York's ICE backtracks a little to reconsider the risks.

Bitcoin and cryptocurrency trading is still too opaque, and the Intercontinental Exchange (ICE) will hold back for now from launching futures product, said the market operator's CEO Jeff Sprecher.

"We didn’t think it was obvious to rush out a product and be first and settle against an index on a lot of exchanges that are not particularly transparent," Jeff Sprecher said during a Goldman Sachs conference.

For now, the biggest concern about Bitcoin futures is the very volatile price of the asset, which the futures are trying to "tame" with trading limitations to avoid fluctuations above 20%. In some cases, volatility as much as 7% would trigger limitations.

Ahead of the futures launch, Bitcoin has topped $12,000 and continued with increasing strength, with projections for year-end prices at $15,000.

The biggest concern is liquidity and solvency, as the futures would be cash-settled and require a significant payment to stave off physical delivery. But unlike oil or grains, "delivering" Bitcoin may be much faster and hassle-free, so there have been proposals for futures with physical delivery.

While ICE has been a holder of a percentage of the Coinbase company, Sprecher remains skeptical of cryptocurrencies:

"I don’t know what to make of cryptocurrencies," he said.

The CEO added that while a lot of new investment has been flooding the market with a bullish mood, there are many unknowns as to who would want to short the contract. Shorting and bearish moods may put strain on the market operator and settlement house.

"To short that would mean that they have decided to exit and through a legitimate, high-standing, regulated venue, they are exiting, and I look at that and just say, is that going to work out well for me as a venue?," said Sprecher.

In the next few weeks, two contracts would be available to test the behavior of bearish investors.

The cyptocurrency exchange Gemini will auction off the CBOE contract to provide a pricing mechanism for Bitcoin's settlement price, while the CME would rely on a reference rate based on four exchanges, Kraken, itBit, GDAX and Bitstamp.