Escorted by futures trading contracts, Bitcoin has entered into the circle of mainstream finance. This event was marked by the CBOE Global Markets’ launch of Bitcoin futures contracts, on Sunday, December 10, 2017, opening the door to the cryptocurrency market for institutional investors’ trillions of dollars. Moreover, Bitcoin futures has moved the rollout of Bitcoin ETFs one giant step closer to reality.
Bitcoin Futures Could Bring Trillions into the Crypto Market
Bitcoin made its debut in the world of mainstream finance under the symbol XBT. Many predict that this historic event will increase the number of participants and capital in the cryptocurrency market. For example, financial institutions and their vast amounts of dollars can now start trading Bitcoin. Institutional investors welcome the advent of futures because it provides a regulated framework for trading the cryptocurrency. Additionally, Bitcoin futures improve market efficiency.
According to CBOE:
[Bitcoin Futures] bring many benefits to traders, including transparency, efficient price discovery, deep liquidity and centralized clearing. XBTSM futures provide a centralized marketplace for participants to trade based on their view of bitcoin prices, gain exposure to bitcoin prices or hedge their existing bitcoin positions.
Bitcoin’s Derivatives Open Door to ETFs
Bitcoin is inherently volatile, and the advent of futures might further exacerbate volatility. In effect, hours before CBOE’s launch of the futures contracts, the cryptocurrency market was jittery, as shown by the wild swings of Bitcoin’s prices. Bitcoin’s price dipped from over $18,000 USD on December 8, hitting low of around $13,000 USD on December 10, 2017, before swinging upward again to its current price of just over $15,000.
Futures bring new dynamics into the ecosystem. For example, market regulators will increase their scrutiny. Additionally, traders can now short sell the cryptocurrency. Another potential ramification to consider is that because Bitcoin futures occur within a regulated environment, it could make it possible to obtain SEC approval for the rolling out of ETFs.
Spencer Bogart, head of research for Blockchain Capital, told ETF.com:
If you look at what the SEC said in its ETF disapproval from earlier this year, it essentially needed to see the underlying bitcoin spot market become more regulated, or it needed to see a fully functional derivatives ecosystem that is regulated.
The launch of Bitcoin futures provides concrete evidence that the financial industry has finally accepted Bitcoin. Therefore, Bitcoin’s bubble will now either burst, as many have forecast or, Bitcoin will flourish, offering financial institutions unimaginable investment opportunities.
What do you think the impact of Bitcoin futures trading will have on the SEC’s decision to allow Bitcoin ETFs? Let us know in the comments below!
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