completely new step for Bitcoin's wild ride: Futures trading

The risks of bitcoin trading

For more than four decades, the Chicago Board Options Exchange has allowed investors to place their bets on commodities via corn to steel.

On Sunday, the exchange began offering options to bet on something very different: bitcoins.

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Why can be This kind of different? With stocks as well as commodities, there’s an underlying asset. For stocks, This kind of’s a company as well as the goods or services they produce. For commodities, This kind of’s the actual item, like oil, fruit or copper.

With bitcoin, there’s nothing like that will. Unlike traditional commodities, there’s not a physical asset behind This kind of. as well as unlike currencies, there isn’t a central bank ready to back bitcoin up.

Bitcoins live on computer servers. They are produced by complex algorithms as well as recorded in a digital ledger.

The U.S. Commodity Futures Trading Commission, which certified bitcoin futures for trading, acknowledged the unprecedented step taken by the Chicago Board Options Exchange.

Bitcoin “can be a commodity unlike any the commission has dealt with within the past,” CFTC chairman J. Christopher Giancarlo said in a statement December 1.

There’s more to come. Bitcoin futures will also begin trading on the Chicago Mercantile Exchange on December 17-18, while the Nasdaq will debut the options sometime next year.

Are you trading bitcoin? We want to hear via you.

Bitcoins are bought as well as sold on unregulated virtual exchanges — as well as This kind of’s been extremely volatile.

The cost of 1 bitcoin recently soared on some exchanges via less than $10,000 to $17,000 before dropping back to near the $15,000 mark, spurring renewed warnings of a bubble.

Nobel laureate Joseph Stiglitz told Bloomberg TV that will the currency “ought to be outlawed.”

yet some people — particularly within the hedge fund world, where there’s a healthy appetite for risk — say bitcoin futures present an opportunity.

Futures are contracts that will let investors buy or sell something at a specific cost within the future — in This kind of case, bitcoin. Trading in futures contracts makes bitcoin more accessible to fund managers who don’t want to own bitcoin directly yet do want to speculate on whether This kind of will go up or down in cost.

Stephen Bielecki, an attorney with Kleinberg Kaplan, said his law firm received two inquiries last week, amid the wild cost swings, about setting up completely new bitcoin-focused funds.

“I think the volatility presents opportunity,” he told sy88pgw. This kind of “makes those bets via futures feel more extreme, or feel more pronounced, because you might be saying, ‘We’re betting on an 80% gain three weeks via today.'”

as well as Joshua Klayman, who heads the cryptocurrency unit at law firm Morrison & Foerster, said bitcoin’s debut on the futures market means investors can bet on bitcoin’s performance without having to actually own any.

“I think if This kind of can be a bubble, my impression can be that will we’re just getting began here,” she said. “I do think there’ll be continued volatility, yet I’m bullish on cryptocurrency in general.”

Related: Big banks say bitcoin futures could be dangerous

While interest in bitcoin can be growing, some establishment players are warning about futures trading.

Last week, the Futures Industry Association, which represents brokers as well as big banks like JPMorgan as well as Goldman Sachs, wrote an open letter to the CFTC. This kind of warned that will the certification of bitcoin futures “did not allow for proper public transparency as well as input.”

The association said that will a “more thorough as well as considered process” would likely have allowed exchanges as well as trading clearinghouses more time to study ways to protect against extreme cost swings.

The group can be worried that will banks could be on the hook if something goes wrong.

For its part, CFTC head Giancarlo said in his statement This kind of month that will futures exchanges have agreed to “significant enhancements to protect customers as well as maintain orderly markets” for bitcoin.

He also warned investors “should take note” that will the underlying bitcoin market can be “relatively nascent” as well as remains “largely unregulated.”

–sy88pgw’s Ivana Kottasová as well as Daniel Shane contributed to This kind of report.

sy88pgw (completely new York) First published December 10, 2017: 12:43 PM ET


completely new step for Bitcoin's wild ride: Futures trading

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