Many argue that widespread adoption of digital currencies such as Bitcoin will only happen after its volatility subsides and appropriate scaling solutions have been successfully implemented. As the latter continues to be the most controversial issue surrounding Bitcoin, the former is now being managed by market forces. CME Group announced that they will begin Bitcoin futures trading before year end 2017, which has the potential to manage Bitcoin’s volatility.
“We’ll tame [Bitcoin] it into a regular type instrument of trade with rules.” ~ Leo Melamed, CME Group
This announcement is quite timely as it spurred a bull run in the weeks prior to the SegWit2x hard fork that was expected around the 16th of November. The SegWit2x hard fork has since been called off as of November 8th, leading to new all-time highs for Bitcoin.
The combination of the CME Group futures trading announcement and the cancellation of the SegWit2x hard fork has been a catalyst for Bitcoin’s price during the first half of November.
Bitcoin – A new Asset Class
Bitcoin investors see it as a brand-new asset class, one that is primed and ready to take the market by storm. The market cap of all cryptocurrencies has recently gone about $225 Billion USD, drawing much more attention from institutional investors. While many hedge funds are already participating in digital currency investment, reports show that more cryptocurrency focused hedge funds may be on the horizon
2018 may be the start of a larger influx of new capital to the space, evidenced by the increasing number of hedge funds dedicated to the cryptocurrency space. Melamed believes that investment from large scale financial institutions is critical for Bitcoin’s success as it continues to make waves in the industry.
“[Bitcoin futures] That’s a very important step for Bitcoin’s history” ~ Leo Melamed, CME Group
CME Group is helping to pave the way for other markets to begin Bitcoin futures trading. Argentina’s largest futures market, Mercado de Termino de Rosario is now considering Bitcoin related services for their investors interested in digital currencies. Rofex, the futures market in Argentina has been considering offering such services since the spring of 2017. We also saw LedgerX derivatives trading for Bitcoin start in 2017 as well.
Argentina has a long history with Bitcoin, especially being the homeland of Bitcoin evangelist and Xapo CEO, Wences Casares. The hyperinflation seen in Argentina has increased the demand for Bitcoin substantially. Argentinian locals view Bitcoin as a much more stable store of value than their own currency, which is shocking to most Americans who have yet to experience severe hyperinflation.
What do Bitcoin futures mean for Bitcoin bears?
The divide between those in favor and those against digital currencies such as Bitcoin continues to gain new allies. Many Bitcoin bears have “seen the light” and have a better understanding of how transformational blockchain technology is. With that being said, the skeptics will now have a change to bet against Bitcoin through the futures offerings from CME Group. It has been interesting to watch how Bitcoin sentiment has changed on mainstream media such as CNBC.
The news channel seems to mention Bitcoin at least once per day, and even Jim Cramer might be coming around.
CME Group CEO Terry Duffy believes that their futures contracts will make the tradable Bitcoin market much more efficient.
“Today you cannot short Bitcoin. So there’s only one way it can go. You either buy it or sell it to somebody else. So you create a two-sided market, I think it’s always much more efficient.” ~ Terry Duffy, CEO CME Group
When do Bitcoin futures start trading?
The announcement from CME Group came on October 31st, stating the Bitcoin futures trading can be expected before year end. This, of course, is pending regulatory approval. Bitcoin futures trading is expected to begin in the middle of December and the market is speculating Bitcoin’s next move.
It was recently announced that the Bitcoin futures platform would be available for testing on November 20th, 2017.
🚀CME just published that futures will be available for testing on NOVEMBER 20th! Get ready for institutional money! 🚀 pic.twitter.com/sw3JDM3w7u
— Professor Crypto™ [20KBTC] (@ProfesorCrypto) November 16, 2017
It is expected that no other digital currencies will have futures trading, such as Bitcoin Cash, Ethereum, or Litecoin. The fate of Bitcoin is still somewhat uncertain due to the recent explosion of Bitcoin Cash, BCH futures are not expected in 2017.