Published: Mon, December 18, 2017
Finance | By Loren Pratt

Bitcoin futures trading underway

Bitcoin futures trading underway

On Sunday, Bitcoin started trading on the world's largest futures exchange, CME.

"Volumes are going to slowly increase as professional traders get comfortable with the price action and more importantly get comfortable with the volatility".

Cboe contract represents one bitcoin, where as a CME contract represents five bitcoins. The bitcoin futures contract at the CBOE are traded under the ticker XBT.

Cboe Global Markets Inc launched a bitcoin futures contract on December 10. The contract reached at $18,805, which is lower than the reference price of $19,500 set by the exchange for the January contract.

Several investors believe that CME might garner more attention from institutional investors, however, since the final settlement price is derived from multiple exchanges. For many, the launch of bitcoin futures is a major step in the digital currency's path toward legitimacy. A futures contract is something tangible and has the added advantage of not forcing these big investors to hold the physical asset. Indeed, investors could choose to take bitcoin futures as a stamp of approval for the entire crypto asset universe and start diversifying heavily into the most liquid altcoins directly.

But the CME's bitcoin front-month futures contract fell six per cent in the first half hour of trading, according to Reuters, dropping to $18,805, below the $19,500 reference price set for the January contract. That wasn't necessary in its debut.

The derivatives exchange was one of the first to move from the open outcry, "pit-style", form of trading common in the nineties, to a full-fledged electronic trading platform. "The prices are moving around pretty fast".

Futures are contracts that allow investors to bet on the price of something at a future date. It remains to be seen whether large moves in the bitcoin market are possible as we head towards a period of holidays and the end of the year. By Sunday night, it was similar to CME's.

It was on December 1 that CME announced its plan to launch bitcoin futures on December 18th, while Cboe Global Markets said it was launching its own futures contract on December 10, a week before CME. E*Trade Financial considering offering bitcoin futures, according to a person familiar with the matter who asked not to be named. Trading volume and open interest so far is minimal - barely 400 contracts - but that will surely rise in the coming months. "We have had a lot of customer interest, and we have spent a lot of time educating them as to the differences between the two products". Neither are banks and brokers.

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