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Bitcoin Futures Market A Huge Step Forward?

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In 2013, bitcoin enthusiasts were excited by the prospect of being able to purchase pizza using cryptocurrency. Just a few years later, there is an ever-increasing number of game-changing applications of bitcoin and other digital currencies. For instance, one significant milestone is that it is now possible to buy hedge against price volatility with bitcoin futures contracts and other derivatives.

Below we have two experts who provide commentary on how the cryptocurrency industry has matured and what the introduction of advanced financial instruments means for the market.

Abhishek Pitti, CEO of Nucleus
“On its nine-year anniversary, bitcoin has surged to an all-time price high following an announcement by CME Group to launch bitcoin futures by the end of the year. While it’s not the first to announce plans for bitcoin futures, CME may have a better chance of obtaining SEC approval for its proposal. Earlier this year, the SEC rejected a bitcoin ETF proposal put together by the Winklevoss twins, saying the exchange that wanted to list it could not enter into necessary surveillance-sharing agreements, given that ‘significant markets for bitcoin are unregulated.’ If CME does manage to achieve this feat, one of the largest barriers in introducing a bitcoin-based ETF may soon be removed, which will open up the floodgates for both institutional funds and retail investors who haven’t had exposure to bitcoin to get in on some of the action. We could very well see bitcoin going multiple folds higher when that happens. However, bitcoin is quite different from traditional commodities like gold, copper, or rice that are currently traded in the futures markets. Thus, there will be a lot of teething issues that CME will face, as it does not have any other commodity that behaves like bitcoin. What’s more, this commodity can be procured in many more unregulated cryptocurrency exchanges around the globe, which could potentially steer away a lot of traditional and conservative investors.”

Bharath Rao, CEO of Leverj

“Institutions have been dabbling gently in the crypto market using specialized hedge funds as vehicles, but the introduction of bitcoin futures by the CME opens a huge new opportunity for gaining exposure to crypto currency. After all, bitcoin is the bellwether of the entire crypto market, and a regulated, developed exchange product gives confidence to trade large size for many institutions. The ability to hedge against bitcoin enables creation of all manner of crypto products, in addition to simple investment and trading. We are likely to see a flurry of activity in this sphere. CME’s introduction of bitcoin futures may herald the first step in mainstream acceptance of crypto as a real asset class.”

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