Bitcoin and cryptocurrencies have seen a surge in investors, and subsequently price in 2017.
Now, as 2017 comes to a close, bitcoin has one more trick up its sleeve.
From EST 6:00pm (10:00am Monday AEDT) on Sunday, bitcoin futures became available to trade.
This new venture into futures may bring in a number of new investors who were previously hesitant to trust digitally based currency.
Now though, these cautious investors can invest in bitcoin as a regulated product on the exchange list. Investing in the crypto this way means that investors don’t have to sign up and create a digital wallet.
Futures trading is basically ‘cash-settled contracts based on the auction price of bitcoin in US dollars on the Gemini Exchange’.
It is believed that the recent spike in the price of bitcoin was in anticipation of the futures launch.
And while sceptical investors tried to ignore ‘…a largely unregulated spot market underpinned by cryptocurrency exchanges that have been plagued by cybersecurity and fraud issues’, futures offers an alternative to this.
And although bitcoin futures have been optimistically received by everyday investors, it’s been a mixed reaction from the big US banks and brokerages.
Online brokerages like Charles Schwab Corp and TD Ameritrade Holding Corp won’t allow immediate trading of futures.
The Financial Times reports that big US banks, including J P Morgan and Citi ‘…will not immediately clear bitcoin trades for clients’.
And only certain clients’ trades will be cleared by Goldman Sachs.
Due to the massive price increase of bitcoin this year, volatility is especially high for this crypto asset. Futures may potentially lessen sharp increases. Chief executive of Capital Market Laboratories, Ophir Gottlieb states that:
‘Hypothetically, volatility over the long run should drop after institutions get involved…
‘But there may not be an immediate impact, say in the first month’.
However, analysts have sent out a warning not to try and predict what futures may do. Charles Schwab Frederick warns: ‘This [bitcoin futures] is completely unknown territory’.
Whatever your view on cryptocurrencies, bitcoin has undeniably changed the market as we know it., and it is becoming more and more likely that bitcoin and cryptos are here to stay.