The Chicago Board Options Exchange (CBOE) launched Bitcoin futures trading on December 10, 2017.
Over 4000 contracts were traded on the first day, causing two temporary trading halts as a result of the high volume.
Bitcoin Futures increased by about as much as 26% over the course of the first trading day, while Bitcoin itself hit a new all-time high of $17,270 during the same trading session.
The Bitcoin futures contracts are identified by the ticker symbol XBT.
One Bitcoin futures Contract is for 1 Bitcoin (BTC).
Forty percent margin requirements allow for leveraged trading; roughly about $8,000 to $9,000 per contract.
Below is a chart showing the Bitcoin Futures trading activity for the first day of trading, next to a 5-minute chart of the underlying Bitcoin for the same trading day.
A Futures Market for Bitcoin will have a positive effect on the cryptocurrency market in general.
First, being an underlying asset for derivative financial products listed on reputable exchanges such as the CBOE, and soon to be listed on the Chicago Mercantile Exchange (CME), will serve to legitimize Bitcoin and other cryptocurrencies in the eyes of those market participants that remain skeptical about the market.
Accessibility to the cryptocurrency market will be greatly enhanced to those institutions that are currently prohibited by government regulation from owning Bitcoin itself.
These institutions will now be able to participate in the Bitcoin market via Futures and other derivative products.
Furthermore, businesses that have avoided using Bitcoin as a form of payment for large-scale transactions that involved terms, due to the unpredictable volatility of the currency, will now be able to guarantee the value of a transaction using futures contracts to hedges against adverse market price movements, similar to the way businesses handle international transactions.
This will continue to create even more demand for Bitcoin.
Traders will now be able to hedge risk using trading strategies with combinations of Bitcoin Futures and positions of the underlying.
Being able to protect against downside risk in a Bitcoin market that is making unbelievable highs on unprecedented volatility, will ease trader’s concerns about the so called “Bubble” bursting, and Bitcoin losing all of its value overnight.
Consequently, traders will continue to enter the Bitcoin market at its highs, and the increased demand will continue to push Bitcoin even higher.
Long-term investors will also benefit from mitigating risk, and be able to create premium yielding investments using existing Bitcoin market positions that are in-the-money, along with short positions in the Futures.
We see this as the first step.
This should lead to futures contracts for other cryptocurrencies, and then eventually to Cryptocurrency Exchange Traded Funds (ETF).
We will be watching the Bitcoin Futures Market very closely.
We will be updating our subscribers as soon as we know more. For the latest updates on XBT, sign up below!
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
Image courtesy of Richard Yuan via Flickr
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