The Bitcoin cryptocurrency has enjoyed a winning streak as of late, and its inception point to this success arguably stems from CME Group’s decision to offer bitcoin futures starting on December 18. The financial market company announced in early November they will offer a futures market for the currency. However, this sudden rise is to be taken with a grain of salt, according to billionaire Thomas Peterffy.
The CEO of the electronic brokerage firm, Interactive Brokers, has warned traders of the currency’s volatile nature as it has the potential to cause a similar economic crisis to that which occurred in 2008. Petterffy, who is considered to be “the father of high-speed trading,” thinks a bitcoin futures market will set a chain-reaction that will end in a full-blown financial crisis.
A bitcoin futures market will allow people to buy specific quantities of the cryptocurrency at a specified price with a delivery set at a specified time in the future. In other words, people will be able to limit their losses, and trade the commodity within a legitimate environment, a system that Petterffy believes to lack the proper safety measures.
One of the main reasons for his fear is the clearing houses that settle futures contracts. If the price of bitcoin were to fall, the clearing houses would be forced to take the blame and hope that the bitcoin would recover as they wouldn’t be able to cover the difference. Peterffy said that larger clearing houses would be able to accommodate this new market, however, he is not so sure about the smaller ones. A worst-case scenario would see smaller clearing houses deplete their liquidity trying to cover bad bitcoin bets, leaving other futures contracts open.
“The issue is they’re putting bitcoin the same basket as US Treasuries, stock index futures, and all the really serious products,” states Petterfy.
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