On December 18th, the CME bitcoin futures launched nearly after a week of its first debut on CBOE exchange, a week earlier. Since then, at the writing of this blog, the CME futures have dipped a little, while the CBOE futures have increased in value by about 15% since its inception. Even though, traded on both exchanges, there are some key differences between these future products. The CBOE contract represents one bitcoin, while the CME futures represent five bitcoins. Also, the CBOE settles its future against a daily price auction from Gemini, while CME tracks several crypto currency exchanges to establish the price.
What are BTC Futures? Salient Advantages of Investing in Them:
Just like any other futures contracts, the Bitcoin future contracts are based on the underlying crypto currency asset, and what an investor foresees the price of the Bitcoin will be in the future. The introduction of Futures in the crypto currency market is a “Goodness,” as it is subject to regulations, unlike the underlying asset, the Bitcoin. In addition, the BTC futures bring an additional level of ‘Credibility,” as the futures can be traded by the speculators where the Crypto coin itself is illegal to trade.
In addition to adding credibility to the cryptocurrency market, the futures also allow investors an extra mechanism to trade the crypto currency with the knowledge that it is a regulated market. This increases interest in Crypto trading, helping to push the prices up further. For example, on the opening day of BTC futures the Bitcoin prices surged to by almost 10%.
Investing in BTC futures offers several other benefits also. Like any other futures contracts, they are highly leveraged. For example, the CME group has about 40% margin requirement for the Bitcoin futures. It means that one has to upfront only about 40% of the future contract. So, in other words for one CME contract – $80,000 (Five Bitcoins at a hypothetical $16,000 price), an investor has to upfront only $32,000 to acquire $80,000 worth of bitcoins. This lends itself to an extraordinary leverage opportunity for an investor to gain from a simple multiplying effects of leverage buying.
Among other advantages of crypto currency futures, the increased liquidity, influx more institutional investors, and foreign investors is expected to stabilize the crypto trading market with opportunities for some spectacular gains.
What Future holds for The Crypto Currency Futures?
Launching of the Bitcoin futures by two of the most respectable exchanges in US is a testament to the fact that crypto currencies have started gaining “respect,” not only from the speculators but also from the main stream investors. Thus, as one peeks into what holds for the Bitcoin futures, the following picture emerges readily.
Trading in Crypto currency futures is going to pave the way for brokerage firms to introduce Bitcoin ETFs. In fact, there are at least three firms, two in US, and one in Canada – who have filed petitions for Bitcoin ETFs with SEC only in last few weeks. This will certainly attract the small investors who do not have large funds to invest, but still through ETFs can participate in Crypto currency trading,
Establishments of regulated market in Crypto currency futures will allow large corporations to hedge against other business transactions, say Foreign exchange where they do not have to keep large investments in foreign currencies to hedge against FX market fluctuations
And, finally as crypto currencies and the associated digital transactions are accepted by businesses, individuals, and corporations alike – the futures market will evolve, new sophisticated products – like derivatives will be introduced to make Crypto currencies as a part of an average Joe’s portfolio.
At Platinum Trading Institute, we have experienced traders/mentors with expertise in Crypto currency trading as well as in Crypto Futures trading. And, in fact this is the best time to learn cryptocurrency trading, as it is in the infancy stage and offers ample opportunities for some spectacular gains. If interested, please sign up for free one-on-one introductory session on Crypto Currency Futures Trading course on www.platinumtradinginstitute.com.