The Merkle

CME and CBOE Receive Regulatory Approval for Bitcoin Futures Contracts

The past few weeks have brought major changes for Bitcoin in the financial sphere. More specifically, we are seeing more and more entities attempting to expose customers to Bitcoin. Both CME Group and CBOE Global Markets have now officially received regulatory approval to offer their Bitcoin futures. This is a big milestone for the world’s leading cryptocurrency, to say the very least.

US Regulator Approves Bitcoin Futures Trading

It was only a matter of time until the Commodity Futures Trading Commission rendered its verdict on Bitcoin futures trading. With both CBOE Global Markets and CME Group hoping to offer these products before the end of 2017, such a decision had to be rendered pretty quickly. With regulatory approval now having been granted, we may see a lot more bullish Bitcoin price action in the very near future.

Indeed, once the news broke, the Bitcoin price immediately started moving up again. After a few rough days, we saw the Bitcoin price surpass US$11,000 on its way to a new all-time high. This confirms the bullish trend established earlier this year is still in effect. It is evident this news portends a very bright future for the world’s leading cryptocurrency. Exposing institutional investors to Bitcoin will have some interesting ramifications moving forward.

It is a positive sign that the Commodity Futures Trading Commission has no problem with financial institutions providing exposure to the Bitcoin price through a traditional investment vehicle. Futures contracts, which can be found across most financial exchanges, have also been making their way into the cryptocurrency sector as of late. This is a major development for the world’s leading cryptocurrency, although it remains to be seen what its effect will be on the Bitcoin price over the long term.

According to CME Group, its Globex electronic trading platform will provide access to these Bitcoin futures contracts come December 18th. It is unclear when CBOE Global Markets will make its product accessible, although we know it will be within the next three months. This means things will get pretty interesting for the Bitcoin price in the very near future. It may even lead to more people actually buying Bitcoin instead of relying on futures contracts.

As one would expect, a vehicle linked to the Bitcoin price is always subject to volatility. Both CME Group and CBOE Global Markets will guard against such volatility as best they can. This means both companies will have to introduce some very strict risk management safeguards. How both entities plan to go about this remains to be seen. Additionally, both companies will share data in the settlement process with the CFTC. This degree of transparency is direly needed when it comes to new investment vehicles such as Bitcoin futures.  

Considering that the Bitcoin price has increased in value rather spectacularly, it remains to be seen if this new investment vehicle will be of great appeal. There are still a lot of concerns over whether or not Bitcoin is in a bubble, as this accelerated growth has stoked fears among financial experts. At the same time, Bitcoin has a track record of proving financial experts wrong time and time again. Whether history will repeat itself here remains to be determined.