WASHINGTON, Nov. 1, 2017 (The Ferowich Report) – Bitcoin is transitioning from a fringe currency into a mainstream product derivatives traders can’t wait to get their hands on.
The Chicago Mercantile Exchange (CME) announced plans to launch futures contracts with bitcoin as the underlying asset by the end of Q4 2017.
The front page of the Wall Street Journal, A1: Bitcoin Moves Toward Mainstream, Poised to Join Oil, Gold in Futures Trading.
What you need to know: “Introducing a U.S. futures contract based on bitcoin would enable Wall Street banks and trading firms” to hedge against bitcoin’s vertigo-inducing price volatility, WSJ’s Alexander Osipovich writes.
- As a reminder, “futures are a way for trade to bet on whether the price of a commodity, such as oil or gold, will rise or fall.”
Who benefits: Hedgers and speculators are the biggest players in the futures market. Listing bitcoin futures may also “provide retail investors with an easier way to trade bitcoin,” the WSJ notes.
Why it matters: Bitcoin’s nearly infinite price growth from July 2010, when a coin was worth $0.08, to Wednesday’s BTC price of $6,624 shows the cryptocurrency isn’t just a marginal phenomenon. Offering bitcoin futures on a major exchange validates that bitcoin is here to stay in the currency world.
“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,” per Terry Duffy, CEO and chairman of CME.
“As stores of value, many investors perceive gold and, more recently, bitcoin as second to none,” reports Blu Putnam, CME’s top economist.