Quiet Debut for Bitcoin on CME
Last night saw the long-awaited arrival of Bitcoin futures trading on the Chicago Mercantile Exchange (CME). The CME is the world’s largest futures exchange and had announced the introduction of a Bitcoin product earlier this month. The January-2018 contract opened at over $20,000.
At time of writing Bitcoin is down since the open. It fell as low as $18,345 but is currently trading $1,000 higher. Volume is over 600, meaning that more than 600 contracts have been bought and sold. Trading is slow and steady compared to the 19% price rise last week when bitcoin launched on the Cboe.
It has been reported that on the evidence of the first trading session, CME traders are more likely to be institutional investors. This is unsurprising as the CME contract is larger and more expensive to trade than the Cboe Bitcoin contract. The CME contract represents five Bitcoins and the Cboe contract just one. The CME also claims to have more accurate pricing, taking its prices from a selection of cryptocurrency exchanges. The Cboe contract refers only to the price on the Gemini exchange.
Normalization of Cryptocurrency
The announcement of Bitcoin futures contracts was greeted with enthusiasm in the crypto-community and was widely seen as Bitcoin maturing into a regular asset accepted by the financial mainstream. However, not everyone was so keen. The clearing houses and institutions who would have to actually deal with the futures contracts complained that things were being rushed through with insufficient consultation. They argued that Bitcoin prices are so volatile that risks should be better distributed throughout the system.
Now the SEC has started to offer regulatory guidance to the crypto-space, and with bitcoin futures up and running, there are high hopes that next we might see the arrival of an Exchange Traded Fund (ETF), perhaps as early as 2018. This is the next crypto milestone and would open Bitcoin up to individuals and institutions who could get exposure to the currency without having to hold it.