Bitcoin futures trading may draw investors away from equities
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The world’s biggest futures exchange will begin trading bitcoin futures today.
Cboe Global Markets’s bitcoin futures market will go live at 11am AEDT, allowing investors to bet on the future price of the cryptocurrency without having to deal with it directly.
It’s the first major market to trade in bitcoin futures, and will give investors a new way to gain access to the hot commodity.
The move may further encourage investors away from traditional equities and into alternative markets, says corporate advisor Edwin Bulseco.
“The futures market will buoy further interest in bitcoin but will also up the risk,” Mr Bulseco told Stockhead.
“There is already a market for bitcoin, and the appeal is that there is a limit on supply. What you will find is that futures will be an avenue for players who weren’t in the market for it initially.”
While many traders will be excited about a regulated way to bet on or hedge against moves in Bitcoin, others caution that risks remain for investors and possibly even the clearing organisations underpinning the trades, reports Reuters.
Concerns hang over Gemini, the cryptocurrency exchange Cboe is working with to launch the contracts, according to Business Insider Australia.
Founded in 2015 by Tyler and Cameron Winklevoss, who reportedly own a billion dollars of bitcoin, Gemini is small enough to be manipulated. Any sudden shift in the set price could make the difference between a contract that is a money maker or a money loser.
Gemini has also suffered outages amid high-demand for bitcoin.
That volatility has so far discouraged big American players from getting involved.
Some of the biggest US futures brokers, including JPMorgan and Citigroup, will not immediately clear bitcoin trades for clients once futures contracts in the cryptocurrency begin trading, the Financial Times reported last week.
“You haven’t seen traditional banks go into cryptocurrencies because of regulation and volatility but if the futures market becomes more regulated – there will be a lot of traditional investors more seriously making moves in the industry,” Mr Bulseco said.
“It’s hard to ignore – ultimately people are in the market to make money and I think over time the big players will understand it but the decision may not be all internal, more so driven by a push from their clients.”