CME Group, the world’s largest derivatives exchange operator, is launching a bitcoin futures contract. Pending approval of course.
Bitcoin Price Reaches Record High
If successful, it means we could have a futures market for bitcoins before the end of the year. The news sent bitcoin’s price higher once again, reaching a new record high of US$6,420.
The CME bitcoin futures contract is likely to be the first, but certainly not the last. The financial institution has been racing with rival CBOE Holdings, to be the first to offer a bitcoin related trading platform. A race that is only just beginning.
Highlighted by the fact that only just over a month ago, CME President Bryan Durkin was dismissing bitcoin. On 27 September he told Bloomberg:
‘I really feel that bitcoin is very nascent right now…
‘I really don’t see us going forward with a futures contract in the very near future.’
I’m not sure how Mr Durkin defines ‘near future’, but five weeks seems pretty ‘near’ to me. It was apparently enough time for him to change his tune as well. Perhaps he’s caught up on bitcoin time. Everything seems to move faster when you’re dealing with crypto volatility.
Today CME CEO, Terry Duffy, was doing the talking:
‘Given increasing client interest in the evolving crypto-currency markets, we have decided to introduce a bitcoin futures contract‘.
Interest in Bitcoin is Growing
Corporate backflips aside, it’s a good sign for bitcoin. Interest is growing and it seems CME’s clients want to dabble in the crypto space, just as long as it’s through an institution that they trust. And if this futures contract is approved, it could pave the way for bitcoin exchange-traded funds (ETFs).
John O’Rourke, president and director of Riot Blockchain Inc, told Reuters:
‘This is going to help tremendously with institutional support as well…
‘That may help manage the volatility. I know that some institutionals see that as a hiccup.’
The big money is knocking on the door. When it comes, it could create a bitcoin frenzy unlike anything we’ve seen before. The futures contract is the first step, though it’s more of a sideways one.
While it certainly accounted for a surge in bitcoin’s price, the actual futures contract won’t trade in any actual bitcoins. It will be settled in cash and the price will follow CME’s own Bitcoin Reference Rate (BRR). A daily snapshot of the US dollar price of bitcoin. Which if you’re familiar with the crypto markets, could vary a lot.
It means CME will effectively trade ‘paper bitcoins’, but it will still be closely tied to the ‘real’ bitcoin price on current exchange markets.
Wall Street Can’t Ignore Bitcoin
Still, it marks a landmark decision. Clearly Wall Street can’t ignore bitcoin. Especially when their clients are desperate to get a piece of the action.
It’s why we believe bitcoin and cryptos in general, still have strong growth ahead of them. A tsunami of institutional money is coming and when it does, prices could surge astronomically. Don’t dally, learn how to get a hold of some bitcoin before the wave.
Junior Analyst, Money Morning