Bitcoin Trading via Bitcoin Futures
The largest exchange owner in the world just reversed its previous stand on Bitcoin. CME Group, Inc. announced today that it’s opening up bitcoin futures, a stock investment trading for the cryptocurrency, by the end of 2017, after it acquires the necessary regulatory permits from the U.S. Commodity Futures Trading Commission (CFTC). The decision comes only a month after CME Group President Bryan Durkin previously dismissed the idea, saying on Bloomberg Television that, “I really don’t see us going forward with a futures contract in the very near future.”
“Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,” Terry Duffy, CME Group chairman and CEO, said in a company press release. “As the world’s largest regulated [futures exchange] marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities.”
Even before the CME Group’s decision to launch bitcoin futures, bitcoin trading has already been happening. Most notably, a startup called LedgerX already received CFTC approval earlier this month to offer swaps and option on bitcoin, according to Bloomberg. Apart from LedgerX, however, most of professional traders and investors who are keen on bitcoin had to trade in rather unfamiliar venues that too often risk “anti-money laundering and know-your-customer rules,” Bloomberg added. With the CME Group, these professional traders and investors would have a more regulated avenue to access the rather volatile cryptocurrency.
The creation of bitcoin futures by the CME Group could finally make it possible to establish an exchange-traded fund that’s based on the world’s most popular cryptocurrency, which has been previously difficult due to bitcoin’s largely unregulated nature. The CEM Group plans to use the CME CF Bitcoin Reference Rate (BRR) as a daily reference rate for the U.S. dollar price of bitcoin, in order to try to put a semblance of order and regulation. The BRR was calculated and published by the CME Group in tandem with Crypto Facilities Ltd.
“We are excited to work with CME Group on this product and see the BRR used as the settlement mechanism of this important product,” Dr. Timo Schlaefer, CEO of Crypto Facilities, said in a statement. “The BRR has proven to reliably and transparently reflect global bitcoin-dollar trading and has become the price reference of choice for financial institutions, trading firms and data providers worldwide.”
News of the CME Group’s decision has already affected the standard value of bitcoin, as prices have surged past a previous record-high of $6,000. As of writing, bitcoin is currently hovers just above $6,000, up by almost $900 compared to last week’s prices. Experts have been predicting even more price hikes in the coming months, with bitcoin expected to reach $10,000 by April 2018 on the road to soar above $25,000 in next five years. Bitcoin prices have remained high despite news of another Bitcoin blockchain split looming.
Disclosure: Several members of the Futurism team, including the editors of this piece, are personal investors in cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.