Revealed: The Real Advantages of the CME and CBOE Bitcoin Futures Contracts
Bitcoin, the world’s number one cryptocurrency, has not ceased to be in the mainstream news since the beginning of 2017 when the price of bitcoin hit the $2000 handle for the first time in its life. Back in January, even the most seasoned cryptocurrency analyst wouldn’t have predicted the Bitcoin price to surpass the $10,000 price region, not to talk of reaching and dusting the $12,000 mark.
With bitcoin making new all-time highs almost with each passing week, the cryptocurrency’s popularity, acceptance, and integration also has grown exponentially. Many institutional investors like the Swiss-based Falcon bank have already started rendering bitcoin-related services to its clients and some others like the CME Group and CBOE Global are putting preparations in top gear to enter the Bitcoin ecosystem through futures trading and benefit from the bitcoin ‘gold mine’.
Although, Bitcoin has many skeptics and naysayers who continuously predict the fall of the ‘giant,’ like the JPMorgan CEO – Jamie Dimon, going as far as saying bitcoin is a Fraud and that he wouldn’t hesitate to sack any of his employees who trade the cryptocurrency. In response to skeptics like Jamie Dimon, BTC-USD keeps reaching new all-time highs consistently.
For the Chicago Mercantile Exchange and the Chicago Board Options Exchange, bitcoin has proven too hard to ignore. Here we shall explore some of the advantages the two financial giants could bring to Bitcoin investors via the Futures Contracts.
Each trading day, the contracts will be settled using a transparent reference price. Although the reference price might not be hundred percent accurate but will be written into all contracts involving Bitcoin. Just as is obtainable in the jewelry world, where jewelers and retailers use reference prices for gold to settle their contracts. The transparent settlement price system will make using Bitcoin as a medium of payment more comfortable for all parties.
Easier To Secure
Some Bitcoin owners still do not know how to secure their Bitcoin wallets properly. Some have even misplaced their paper wallets or forgotten their recovery phrases thereby losing their Bitcoin. With futures contracts, Bitcoin investors need not bother their heads about security because the company handles everything.
The futures market is regulated by the Commodity Futures Trading Commission (CFTC). Many Bitcoiners hate this aspect of the deal because Bitcoin and the State do not go together. The good news here is that the CFTC regulation is entirely different from that of stocks and bonds. The CFTC is just there to put necessary rules in place that all players need to adhere to, thereby giving everyone involved an equal opportunity. The CFTC regulation will further attract professional traders, thus increasing the trading volume in the long run and also establish bitcoin and cryptocurrency-related futures as critical financial instruments.
Ability to Go Short or Long
This gives the bubble burst predictors a chance to make profits by selling short the Bitcoin futures contract. Unlike in the stock market, the futures market provides investors both short and long options.
At the time of writing, the bitcoin price is at $12,600. It remains to be seen where BTC-USD would reach when these heavyweight institutional investors, CBOE and CME, finally launch futures trading on December 10 and December 18 respectively, but one thing is for sure; liquidity will rise, possibly bringing more interest to the Bitcoin futures contracts than the underlying cryptocurrency itself.