November 7, 2017 (The Ferowich Report) – One of the biggest pioneers of financial futures at the Chicago Mercantile Exchange, and current Chairman Emeritus of CME, Leo Melamed, says bitcoin is headed toward becoming a bonafide asset class in its own right thanks to imminent introduction of bitcoin (BTC) futures in Chicago.
“We will regulate, make bitcoin not wild, nor wilder,” Melamed told Reuters in Tokyo November 7. “We’ll tame it into a regular type instrument of trade with rules,” he said.
“My whole life was built around new technology. I never said ‘no’ to technology. People who say ‘no’ to technology are soon dead. I’m still that same guy who believes in, at least examining change. That’s what bitcoin represents,” Melamed said.
On November 1, CME said bitcoin futures would be available by the end of Q4 2017. Futures will give the market a way to short-sell bitcoin. Right now, market participants are disproportionately longs.
As Mohamed A. El-Erian, chief economic adviser at Allianz SE, points out, hedge funds have found it “very hard to ‘borrow’ the currency’ and there are no straightforward highly correlated assets to construct adequate proxies that then influence its pricing. As a result, the market is structurally, and very heavily, tilted in favor of the longs.”
When you have a two-way market featuring the ability to go short and long on bitcoin, the financial pioneer, 85, says institutional investors will start to gain an appetite for bitcoins in their portfolios.
As chairman in 1972, Melamed created the International Monetary Market, the first financial futures exchange in the world, which also traded currency futures. The CME and IMM would later introduce futures contracts for US Treasury bills, Eurodollars and stock indices.
“The world in the 1970s didn’t look at currency trading as a valid instrument of finance. I, too, went from not believing [in bitcoin] to wanting to know more,” the Chicago native explains.
Why it matters: Bitcoin futures contracts provide more exposure to the public, investors, and the greater financial world.
Dice hola: While CME was the first to announce BTC futures, Argentina’s largest futures operator, Mercado de Termino de Rosario (Rofex), is poised to follow suit. “Our idea is to make an announcement before the end of the year” for “accepting bitcoins as a guarantee of futures contracts,” Rofex chief Diego Fernandez told Bloomberg.