Pending Review, CME Announces Possible Bitcoin Futures Launch
It was indeed an historic day for Bitcoin yesterday. Not only was it the 8th Birthday of Satoshi's original Bitcoin whitepaper, but it was also the day that the CME announced it was planning to launch Bitcoin futures. This was no doubt one of the best birthdays that Bitcoin could have had.
The announcement was welcomed by most Bitcoin traders as the price rallied by almost 5% on the news. The announcement claimed that they derivatives would be planned for the fourth quarter of 2017 once all the relevant regulatory reviews had been completed.
The new Bitcoin futures contract would be cash settled and based on the CME CF Bitcoin Referance Rate (BRR). This index serves as the once-a-day reference rate of the US dollar price of Bitcoin. According to Terry Duffy who is the CME Group chairman and CEO:
Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract. As the world's largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities
Great for Mass Adoption
The move was heralded by Bitcoin users because of the many implications Bitcoin derivatives could have for eventual mass adoption of the cryptocurrency into numerous portfolios at institutions. Although we already had Bitcoin futures on the Bitmex Exchange, the CME announcement had a lot more weight behind it.
This is because it will provide a standardized and regulated contract which investors can trade on an exchange. As more investors and traders use derivatives to hedge their portfolio, this will decrease the volatility in Bitcoin. As this occurs it also makes the cryptocurrency that much more attractive for portfolios. Hence it has some sort of a positive feedback loop.
With the Bitcoin market cap exceeding that of PayPal as well as daily volume larger than that of Apple, it seems as if we are already approaching this adoption. We have previously covered stories of respected investors such as Bill Miller who have invested sizable amounts of their portfolios in Bitcoin.
Where to From Here?
The price of Bitcoin is constantly making new highs week after week. Although the CME announcement is a great move forward and a great milestone, the most important factor impacting the price of Bitcoin over the next month is the upcoming hardfork.
However, the momentum clearly seems to be with the bulls as most crypto traders have moved out of Altcoin holdings. Some well-known voices in the cryptocurrency community such as Max Kaiser were also predicting all-time highs to continue.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.