Bitcoin future trading for higher prices than Bitcoin itself
As we observe that In-proficient crypto-marketprices in the future and current markets tend to converge. Bitcoin future, however, are trading at a more than 10% premium compared to prices in the spot market.
In an efficient market, arbitrageurs spot price differences and make contra-trades in both markets, meshing a profit without taking any risk. In this case, arbitrage traders can sell Bitcoin future and buy Bitcoins in the spot market, locking in a profit irrespective of the way Bitcoins price moves.
The Bitcoin market is far from efficient. There are price differences between different exchanges, with Crypto-currency trading at a huge premium in Asia and countries like Germany. However, traders are unable to take advantage of the price difference, because of capital controls imposed by various governments.
The presence of circuit breakers also represents a difference between the current and the futures markets. On Bitcoins debut on the Chicago Board of Excahnge (CBOE) market, two circuit-breakers were triggered, resulting in trading being halted for a few minutes. There was a 2-minute halt when the price gained 10% and a 5-minute halt at a 20% gain. The sharp increase in the price of Bitcoin futures almost result in a third circuit breaker (30% gain) getting triggered.
The high margin requirements, presence of circuit breakers and evolving nature of crypto-currency futures could be one reason why traders have not rushed into crypto-currency futures. The opportunity of arbitrage trading might tempt some of them to dip their toes in the Bitcoin futures market soon.