Former IMF economist Mark Dow enshrined his name in derivatives trading lore when he famously shorted the bitcoin price from its December 2017 peak near $20,000 all the way down to its trough below $3,500 a year later. Now, the legendary crypto short seller is gloating as the first exchange to list bitcoin futures delists the flagship cryptocurrency, perhaps for good.
Writing on Twitter, Dow joked that he caused the market’s liquidity to dry up when he closed out his epic short position.
“I guess this is what happened when I stopped trading it,” he wrote. “Thanks for the memories! $XBT R.I.P.”
On March 14, CCN.com reported that CBOE had suspended the addition of new XBT futures contracts. In its announcement, CBOE said that it chose to axe bitcoin futures while it reassesses its support for crypto products.
“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.”
Dow said that he was not surprised to see CBOE close its bitcoin futures market. Contravening the industry narrative that institutional investors are steadily moving capital into cryptocurrency, Dow said that liquidity in the institutional-focused futures markets got worse every month.
“All joking aside, since I had to roll my #bitcoin exposure each month last year, I saw that the liquidity got worse every time. Hard to buy the story about broadening institutional adoption when you see this.”
Of course, it’s important to put CBOE’s announcement in perspective. CBOE’s bitcoin futures volumes were always far smaller than those of rival CME, the only other US exchange to currently offer crypto futures.
CME reported steady growth in this market throughout 2018, with average daily volume increasing by 119% between Q1 and Q4. Last month, the exchange recorded a record in the amount of BTC futures contracts traded within a single day, as over 18,000 contracts representing a total of 90,000 BTC (~$350 million) changed hands.
Still, CBOE made history in 2017 when it became the first US derivatives exchange to list bitcoin futures. At the time, many cryptocurrency bulls predicted that it would usher in a wave of new investment in the nascent asset class and launch the market to new highs.
Instead, according to analysts at the Federal Reserve, the launch of BTC futures on CBOE and fellow Chicago exchange CME triggered the historic cryptocurrency bubble crash, enabling bears like Mark Dow to make a fortune shorting the bitcoin price as it cratered by more than 80 percent.
While CBOE did not explicitly state that it had permanently halted support for bitcoin, many believe the writing is on the wall, at least in the near-term. In any case, it’s a stunning reversal, given that the exchange raced to become the first to support bitcoin and once boasted that it hoped to launch an entire suite of cryptocurrency products.
Again, those products – including the bitcoin ETF that CBOE has sought to list – could still come down the road, but in this market climate it’s difficult to imagine CBOE taking a chance on another institutional crypto derivative when it failed to build sufficient liquidity in a market as basic as a standard bitcoin futures contract.
Last modified: March 4, 2021 3:20 PM