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First US Bitcoin Futures to Start Trading Next Week
December 18 2017, 02:45 | Alonzo Simpson
A Bitcoin coin is seen in an illustration
One of the key points about bitcoin futures trading is that there will be no handling of bitcoin at all and the futures will be cash-settled.
"We are pleased to bring Bitcoin futures to market after working closely with the CFTC and market participants to design a regulated offering that will provide investors with transparency, price discovery, and risk transfer capabilities", said Terry Duffy, CME Group Chairman and Chief Executive Officer.
CME is not the only USA exchange that is going to add bitcoin futures to their product offerings. In a press release today, CBOE announced it will offer the service to traders beginning Sunday, December 10 at 5 pm CT.
Bitcoin trading markets seem to have already priced the CBOE's move into their assessment of the cryptocurrency's price. At 19:54 UTC on Monday, bitcoin was trading at $11,237.19, unchanged in the last 24 hours. But there are a couple of differences between bitcoin futures trading at the two exchanges.
In recent months, the price of bitcoin has fluctuated wildly, trading from a little over $1,300 in April up to more than $7,400 in early November, before falling again below $6,000 following the news that a much-anticipated "fork" in the bitcoin blockchain was not going ahead. CBOE will derive its bitcoin contract price from the Gemini bitcoin exchange, which is owned by the Winklevoss twins, Cameron and Tyler. Market data from bitcoin exchanges Bitstamp, GDAX, itBit, and Kraken will be used to calculate CME's once-a-day Bitcoin Reference Rate (BBR).
Following the launch of these products, many analysts predict that the Securities and Exchange Commission (SEC) will grant approval to the first exchange-traded fund (ETF) that invests in bitcoin futures contracts, potentially turning bitcoin into a mainstream financial instrument and portfolio asset. Those amounts may become higher in the future.
However, despite the cash-settlement process, some institutional investors have expressed concern at the addition of bitcoin-derived products to CME.