For the first time since 2015, bitcoin has started the new year with a crash. Trading as low as $12,750 on January 2, 2018, it is a far cry from the near $20,000 level hit mid-December 2017. Now investors can trade bitcoin futures on the CME risk free with a demo account.
With that said, there is another way to profit from the cryptocurrency while others rue the losses in their investments; and this comes in the form of futures.
Once Bitcoin futures were launched by CBOE and CME in December 2017, a window of opportunity emerged for people to trade bitcoin without going as far as to buy the cryptocurrency. The principle of futures involves betting on whether the cryptocurrency will increase or decrease in value, effectively allowing those who predict a decline to profit while bitcoin holders’ portfolios decrease in value.
Futures trading is not something that one should dive into without a financial background or extensive trading knowledge, as it is an extremely high-risk venture. In view of this, CME made a move on December 27 to make futures trading more accessible to everyday people, by allowing them the opportunity gain experience needing to expose themselves to any risk.
This comes in the form of a practice account that is available to anyone who would like to try their hand at it. Not reserved only for complete beginners, it also serves as an introduction to existing day-traders who are new to the world of bitcoin and cryptocurrency.
The simulated environment provides the experience and thrill of trading, without fronting any capital. Through the practice account, people have the ability to experience gains and losses, get a feel for the market movements, and accustom themselves to the workings of the platform.
Of course, once ready, the option is there to begin trading bitcoin futures with the opportunity to make a profit and the risk to lose one’s capital.
CME shared the news of their practice account option in a Tweet, yet it has not received a large amount of interest in the week since. One possible cause is the usual quiet period that cloaks the festive season, while another is the anti-climax that has been noted after launch of bitcoin futures.
Although the price of bitcoin soared in conjunction with the futures introduction, the success thereof was short-lived. Interestingly enough, Jim Cramer of CNBC predicted an implosion before futures were even launched, as early as December 8, 2017:
“Once this thing starts trading the futures, they are just going to kibosh [bitcoin].”
Indeed, by January 2, 2018, Business Insider was already speaking of a seven percent dip in futures trading, with investors predicting the further downfall of the cryptocurrency.
Due to bitcoin’s highly speculative nature, it is largely influenced by news and public comment from authorities or influential figures. Just as the 2017 bitcoin hype drove the price further upwards, negative publicity is likely to bring it crashing down.
Similarly to the 1929 stock market crash sparked the Great Depression of the 1930s, bankrupting banks all over the world, a flurry of bitcoin shorts and withdrawals have the ability to prompt other investors to sell their bitcoin investment.
The ripple effect would be the further reduction in the value of the cryptocurrency, and ultimately the bursting of what has long been considered the biggest bubble of all time.
Until then, investors purchase, sell or trade bitcoin at their own risk, with many profiting and many carrying losses. It is a speculative asset, after all; and nobody knows for certain what 2018 will hold for the world’s first decentralized digital currency.