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 futures, while the CME futures represent five bitcoins. Also, the CBOE settles its future against a daily price auction from Gemini, while CME tracks several cryptocurrency exchanges to establish the price.
What are Bitcoin Futures? Salient Advantages of Investing in Them:
Just like any other Bitcoin future contracts, the Bitcoin future contracts are based on the underlying cryptocurrency asset, and what an investor foresees the price of the Bitcoin will be in the future. The introduction of Bitcoin Futures in the cryptocurrency market is a “Goodness,” as it is subject to regulations, unlike the underlying asset, the Bitcoin Futures. In addition, the bitcoin 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 cryptocurrency 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 Bitcoin Futures, the Bitcoin prices surged to by almost 10%.
Investing in bitcoin futures offers several other benefits also. Like any other Bitcoin futures contracts, they are highly leveraged. For example, the CME group has about a 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 simple multiplying effects of leverage buying.
Among other advantages of Cryptocurrency futures, the increased liquidity, influx more institutional investors, and foreign investors are expected to stabilize the crypto trading market with opportunities for some spectacular gains.
What Future holds for The Bitcoin Futures?
Launching of the Bitcoin futures by two of the most respectable exchanges in the US is a testament to the fact that cryptocurrencies have started gaining “respect,” not only from the speculators but also from the mainstream investors. Thus, as one peeks into what holds for the Bitcoin futures, the following picture emerges readily.
Trading in Cryptocurrency futures is going to pave the way for brokerage firms to introduce Bitcoin ETFs. In fact, there are at least three firms, two in the 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 Cryptocurrency trading,
Establishments of a regulated market in Cryptocurrency 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 cryptocurrencies and the associated digital transactions are accepted by businesses, individuals, and corporations alike – the Bitcoin futures market will evolve, new sophisticated products – like derivatives will be introduced to make Cryptocurrencies as a part of an average Joe’s portfolio.
At Platinum Trading Institute, we have experienced traders/mentors with expertise in Cryptocurrency trading as well as in Bitcoin 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 a free one-on-one introductory session on Bitcoin Futures Trading course on www.platinumtradinginstitute.com.