The CBOE Futures Exchange will start trading bitcoin futures Sunday, making it the first traditional exchange to allow investors to bet on the future price of the digital currency.
Many retail stock brokers plan to offer bitcoin futures when they begin trading. XBT futures are specifically created to allow participants to implement straightforward trading strategies, through settlement to a single, tradeable auction price.
CME Group has listed a bitcoin futures contract, to start on 18 December. "We are committed to encouraging fairness and liquidity in the bitcoin market", said Ed Tilly, chairman and CEO of Cboe Global Markets, in a statement. In fact, this was the month when the bitcoin market faced one of its biggest challenges as the hard fork that was scheduled to happen during the middle of November, was cancelled and this led to some correction in the industry as the uncertainty that this event led to, brought in some confusion among the traders.
On Monday, bitcoin slipped to around $10,919, which was down by 2% on the day but still up more than 100% over the past three weeks. In such a scenario, Bitcoin Investment Trust shares stand to lose at least 40% of their value should the sky high premium come back to earth.
Interestingly, the combined digital currency market cap, at $338.1 billion, would rank the market at 31st, ahead of Egypt ($336 billion), Hong Kong ($320 billion), Israel ($318 billion), Denmark ($306 billion), the Philippines ($304 billion), and Singapore ($296 billion).
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Why would any rational speculator pay a 70% premium for bitcoin by purchasing shares of the Bitcoin Investment Trust when the Cboe's bitcoin futures contract enables one to speculate through a brokerage account without paying a large premium? The Motley Fool has a disclosure policy.