World’s largest exchange owner reversed course today and said it plans to introduce bitcoin futures by the end of the year after dismissing such plan last month. The most trending cryptocurrency, which has increased by sixfold this year, climbed to an all-time high record after the announcement.
Going through Luno bitcoin price surpasses the $6500 and $6600 barrier in one day to hit a new record high. This was boosted after the Chicago Mercantile Exchange (CME) announced plans to launch bitcoin futures.
CME is a major giant in trading, some of its products are gold, oil and it has a future for S&P 500. The timing of its decision on bitcoin is a bit surprising because a month ago they came out openly on Bloomberg Television and said: “I really don’t see us going forward with a future contract in the very near future”. That was a statement made by CME president Bryan Durkin.
CME neighbour across the street in Chicago tend to be one of the major stakeholders on Bitcoin future plans. Cboe Global Markets Inc. said earlier this year that it was going to begin a bitcoin future contract by the end of the year or beginning of 2018, this decision still awaits approval from the commodity trading commission. The CME contract will be settled in cash.
Considering CME as the world’s largest regulated FX marketplace, CME group will perform well and provide investors with transparency, risk transfer capabilities and price discovery.
Bogart Spencer head of research at Blockchain capital, made a statement where he said “the creation of bitcoin future is a key step in opening the asset to institutional investors, who currently have few opportunities.
Bitcoins’s push into the mainstream
CME and Cboe may face challenges convincing investors to key into their bitcoin futures. A lecturer at Boston University Mark Williams said that if the underlying pricing is unsound, it could scare people away. His concern is that CME might try to treat bitcoin like corn or wheat future when this commodity is a highly risky class of its own. He also said that since 2009 there have been lots of these types of exchanges, once the world’s largest bitcoin market has gone bust. “CME might have no other commodity future that behaves or looks like bitcoin and this could be problematic.
Head trader at digital asset brokerage Omega one, Jon West, said that the amount of daily margin Cboe and CME require will be an important
measure. Though if it is too high it will be less important for hedging because so much money is required. He advised CME to go slow on how they design their contracts, mentioning that it is a long asset.