What Comes After Bitcoin Futures?

Last night, bitcoin took another tumble. A single coin now trades for US$16,482.

What caused the bitcoin price drop?

Rather than taking profits, investors were pulling out of bitcoin and jumping into bitcoin cash. Bitcoin cash, which forked from bitcoin months ago, has more than doubled in price in December.

bitcoin cash price

Source: Coin Gecko

The switch came after Coinbase announced their 30 million customers would be able to transact into bitcoin cash. Within minutes of their announcement, Coinbase’s website froze.

Also not helping bitcoin prices was the subpar open to futures trading.

The Chicago Mercantile Exchange (CME) launched their bitcoin future contracts earlier this week. However, the January contracts climbed 6% before dropping more than 9%.

What surprised me is the volumes traded in bitcoin futures. Providers Chicago Board Options Exchange (CBOE) and CME haven’t seen any real spikes in volume since offering bitcoin futures.

In fact, volumes have actually been declining. You would think offering bitcoin futures means you had already received strong demand to provide them. But so far, that isn’t the case.

Contracts provided by CBOE are thinning and CME is yet to see big buyers and sellers come into the market.

bitcoin futures

Source: CBOE

bitcoin futures

Source: CME Group

So what’s next for bitcoin?

At first people were buying bitcoin outright. Then it seemed that there was demand for bitcoin futures. What will be the next bitcoin-related product?

According to CoinDesk, bitcoin exchange traded funds (ETFs) could be next:

NYSE Arca has filed with the U.S. Securities and Exchange Commission (SEC) for a proposed rule change that would allow for the listing of two exchange-traded funds tied to bitcoin futures.

Public records dated Dec. 19 show that the company wants to list two ETFs — the ProShares Bitcoin ETF and the ProShares Short ETF — that were originally proposed in September. According to the document, NYSE Arca, which is owned by Intercontinental Exchange (ICE), submitted the proposed rule change on Dec. 4.

As indicated in the filing, the ETFs would track two recently launched futures contracts, released in the past week and a half by Cboe and, later, CME Group.

Yet I suspect a bitcoin ETF might not fare as well as buying the real stuff. As bitcoin futures have shown, investors are willing to pay up for regulated exposure to bitcoin. But most prefer the real thing, probably because of the potential returns.

If volumes for bitcoin futures don’t pick up, I’d be far more sceptical about the success of bitcoin ETFs.


Härje Ronngard,

Junior Analyst, Money Morning

PS: Want to find out more about the secret world of bitcoin? Click here.

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