23 October 2018
Vontobel's mini futures products are likely to usher in more two-way price movements in the bitcoin cryptocurrency. Photo: Bloomberg
Vontobel's mini futures products are likely to usher in more two-way price movements in the bitcoin cryptocurrency. Photo: Bloomberg

Swiss bank launches futures to enable bets against bitcoin

Swiss bank Vontobel has launched two mini futures that will allow investors to bet against the value of bitcoin or hedge their positions in the cryptocurrency.

The mini futures, derivative instruments that combine features of futures and options and tradable for considerably less than regular futures contracts, were kicked off on the Swiss stock exchange last Friday, according to Reuters. 

Under the arrangement, when the value of bitcoin falls by 10 percent, the value of the more conservative of the two mini futures would rise by almost 6 percent while the other would gain almost 10 percent, the report said, citing term sheets published by Vontobel.

The new certificates could usher in more two-way price movement in what has largely been a one-way market so far.

“We have seen a big demand for our long tracker certificate from investors interested in playing the upside potential of bitcoin and now they have also the possibility to hedge their position or go short,” Eric Blattmann, head of distribution of financial products at Vontobel, said in a statement.

Bitcoin is trading at a record high and has soared nearly eight-fold so far this year. But the virtual unit has fluctuated wildly this month, plunging as much as US$1,000 last week from its Nov. 8 record high of US$7,888 and then recovering more than a third of its value in the last four days.

As at 9:09 am Hong Kong time on Nov. 21, bitcoin was trading at US$8,240, after smashing through US$8,000 for the first time over the weekend.

The launch of the futures products on the Swiss stock exchange by the country’s second-biggest provider of structured products comes amid an uptick in interest in cryptocurrency products among institutional investors.

CME Group, the world’s largest derivatives exchange operator, announced recently that it will launch a bitcoin futures product.

Along with Vontobel, Swiss investment solutions provider Leonteq Securities also announced the launch of a separate product, Bloomberg reported.

Leonteq’s product has a two-month maturity, while Vontobel’s is longer, but investors can exit their positions early since the products will trade on an exchange.

Bloomberg quoted Manuel Durr, head of public solutions at Leonteq, as saying that clients appreciate being able to open long or short positions in bitcoin.

“The initial feedback has been extremely positive,” he said. 

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