Get set for trading in Bitcoin futures
new york — The intersection of digital money and traditional finance is at 400 South LaSalle Street in Chicago today. That’s where trading in Bitcoin futures opens Sunday evening, as the first major US exchange offers a product pegged to the wildly fluctuating cryptocurrency.
The currency has risen more than 1,500 per cent this year, and about 85 per cent just in the past two weeks, driven largely by demand from individual investors. But even as Bitcoin — launched in 2009 as an alternative to banks — divides Wall Street executives and central bankers worldwide, those kinds of gains are a powerful magnet.
The futures offered by CBOE Global Markets, and similar contracts that start trading in a week at another Chicago-based exchange, CME Group, may open the door to greater inflows of institutional money, while also making it easier to bet on Bitcoin’s decline. Either December 18, Cantor Fitzgerald won approval from regulators to trade binary options, and LedgerX, a startup exchange, already trades Bitcoin options.
“There will be a ramp-up time,” said Ari Paul, chief investment officer of Blocktower Capital Advisors. “There just isn’t a rush. The professional traders will mostly be looking to do arbitrage, between the futures and Bitcoin itself. I don’t expect massive money flows right away but then I expect gradual buying from people who want passive exposure” without buying Bitcoin directly.
The two exchanges on December 1 got permission to offer the contracts after pledging to the US Commodity Futures Trading Commission that the products don’t run afoul of the law, in a process called self-certification.
“Derivatives should have the effect of bringing a deeper liquidity to the market which should reduce volatility,” said Alistair Milne, chief investment officer and co-founder of Altana Digital Currency Fund. — Bloomberg