The big story that sent Bitcoin to the moon earlier this month has been updated this week with more good news. Both the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) have released details on upcoming futures contracts for the cryptocurrency.
These proposed trading contracts by major exchanges caused an upward surge in Bitcoin price earlier this month as it was seen as a sign of financial institution and mainstream adoption. The relentless uptrend continued and Bitcoin broke record after record the last high being a little over $8,200 just yesterday.
The CBOE released details of their BTC (or XBT) contracts on the exchange blog. There will be a 1BTC contract with the lowest price fluctuation (tick) of $10 released once regulatory reviews have been passed. A specific date was not mentioned though it is likely to be before the end of the year in line with CME’s announcement.
In response to questions CFA Russell Rhodes stated:
“The question I am constantly hearing is, “How will the futures prices relate to spot Bitcoin pricing,” and the best (and most honest) answer I can give is, “I don’t know.” I’ve done academic work on the launch of newly listed products in the past and prior assumptions about new markets often are off the mark. I’ve heard arguments for the futures trading at both a premium and a discount to the spot price, personally, I think the best strategy is to see what the market tells us when Bitcoin futures are available for trading.”
Previously CME announced a mid-December date for its Bitcoin contracts however that was later changed according to Reuters. The CME website currently states that futures contracts will be available before the end of the year pending all relevant regulatory review periods.
The contract will be a 5BTC offering with a price tick of $5 for each coin in the contract or $25 for the total of five. There will be spot position limits set at a thousand contracts.
The news bolstered the price again as it is likely to when these contracts go live next month. Bitcoin seems pretty unstoppable at the moment and the expectation is that these futures would impart legitimacy to the asset class which could see institutional investors entering the Bitcoin market.
In a statement to US news media Chairman and CEO of CME said:
“Today you cannot short Bitcoin. So there’s only one way it can go. You either buy it or sell it to somebody else. So you create a two-sided market, I think it’s always much more efficient.”