Brokerage Firm to Allow Negative Bets Against Bitcoin
Bitcoin futures can now be shorted by Interactive Brokers, says CEO Peterffy.
In a move that could shift the trading dynamics of Bitcoin futures, the brokerage firm Interactive Brokers Group Inc will allow its traders to begin betting against the cryptocurrency. The firm’s CEO Thomas Peterffy told the Financial Times that clients will be allowed to short Bitcoin futures by the end of this week.
The announcement comes on the heels of a strong bull market after Bitcoin futures trading began this week. However, according to the Financial Times, Interactive Brokers is handling an estimated 53 percent of the total futures volume on 4 Board Options Exchange (CBOE) --- a sudden open short potential could reverse the bullish trend.
Massive cost, massive risk
While opening the door for shorting Bitcoin, Interactive will require that short positions deposit five times the value of their futures contracts in order to protect the brokerage.
In concrete terms, to short Bitcoin futures purchased on CBOE, an investor would need to margin $100,000. This margin would be nearly $500,000 for Bitcoin futures purchased at CME, where contracts are five times the size.
With no limits to potential losses on short positions if Bitcoin continues to rise, Peterffy himself points out that betting against the cryptocurrency is especially risky, stating:
“I think it’s suicidal to sell this contract, because it can run away with you. How much a Bitcoin is worth, nobody knows.”