(Bloomberg) -- Bitcoin surged past $16,000 for the first time on Thursday, with frenzied demand to trade the cryptocurrency buckling one of the largest exchanges just days before the first U.S. futures contracts begin trading.
Bitcoin’s rally of more than $3,000 in the past 24 hours continues to defy its legions of skeptics, as mainstream demand for the world’s largest cryptocurrency explodes. Investors flocking to open new accounts or place orders Thursday left Coinbase, the largest U.S. exchange, warning of outages and slow transactions.
Trezor, a wallet service, tweeted that it’s having “minor issues” with its servers, while Bitfinex, the largest bitcoin exchange in the world, said on Twitter that it has been under a denial of service attack for several days and that it recently got worse.
Bitcoin listed at $16,395 as of 1:15 p.m. in Bloomberg pricing that is a composite of exchanges. That takes its rally this year past 1,500 percent and its market capitalization is now at $274 billion. On Thursday it topped out at $16,777.08 after starting the day at $13,363.25.
“This is irrational exuberance,” Royal Bank of Scotland Chairman Howard John Davies said in an interview on Bloomberg TV on Thursday. “This is a very, very unusual market, that shows we’re not in a normal two-way trading market.”
Daily price swings of that magnitude and weakness at the exchanges underscored concerns raised Wednesday by some of the world’s biggest brokerages, which told regulators the contracts have been rushed to market without enough due diligence. The new bitcoin derivatives products are slated to begin trading this month and are expected to boost mainstream demand. On a day such as Thursday, trading would pause under proposed daily price-swing limitations.
The slowdown on exchanges also highlighted the disparate pricing that can occur. The surging demand on Coinbase sent prices as high as $19,697 at 11:23 a.m., higher by more than $3,000 than other exchanges. Coinbase added at least 300,000 users since just before the Thanksgiving holiday. The company had 13.3 million users as of Nov. 26, up from 13 million on Nov. 22 and 10.6 million two months ago.
Davies agreed with the brokerages’ concerns that exchanges which are set to offer bitcoin futures and options have failed to get enough feedback from market participants on margin levels, trading limits, stress tests and clearing. Those warnings were laid out in an open letter via the Futures Industry Association on Wednesday.
Cboe Global Markets Inc. has said it will start trading bitcoin futures on Dec. 10, while CME Group Inc.’s contracts are set to debut on Dec. 18. Nasdaq Inc. is planning to offer futures in 2018, according to a person familiar with the matter. Cantor Fitzgerald LP’s Cantor Exchange is creating a bitcoin derivative, and startup LedgerX already offers options.
ASX Ltd., the main exchange operator for equities and derivatives in Australia, on Thursday said it will start using blockchain, the technology that underlies bitcoin, to process equity transactions. The digital currency also got a boost from a successful test of a technology that will attempt to ease congestion in purchases of the digital currency.
Lightning Network, as the technology is known, was conceived to move some transactions away from the blockchain, by allowing buyers and sellers to transact privately and later broadcast their activity to the public network.
The price of bitcoin cash fell on the news, slumping 9.1 percent to $1,342.86, according to prices on coinmarketcap.com. The cryptocurrency rival offers a separate solution to bitcoin’s congestion issue.
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