Date
27 April 2018
CME's bitcoin futures may find more takers among hedge funds and big financial firms, rather than retail investors. Photo: Reuters
CME's bitcoin futures may find more takers among hedge funds and big financial firms, rather than retail investors. Photo: Reuters

CME kicks off bitcoin futures

CME Group, the Chicago-based exchange company, launched bitcoin futures on Sunday, seeking to capitalize on the speculative fervor surrounding the virtual currency.

The exchange kicked off trading of bitcoin futures at 6 pm US Eastern Time, with the first contract for January expiration hitting US$20,650, the Wall Street Journal reports.

That was more than 6 percent higher than the price of bitcoin, which was trading at US$19,395.84 at that time.

The launch came one week after CME’s smaller rival Cboe Global Markets flagged off a similar contract.

Bitcoin has soared more than 1,900 percent this year, an extraordinary run-up that has lured investors worldwide.

Futures on bitcoin allow traders to bet on whether its price will rise or fall, and they offer Wall Street firms a way to trade it on well-known, regulated markets.

But volumes on Cboe’s bitcoin futures have dropped off precipitously since Monday. After more than 4,100 contracts changed hands on the first day of trading, volume averaged around 1,640 contracts the rest of the week—a 60 percent slide, the Journal noted.

Cboe says its volumes are healthy for a brand-new product and expects them to pick up.

Compared with Cboe’s bitcoin futures, CME’s offering may appeal more to hedge funds and big financial firms and less to retail investors, the Journal cited traders as saying.

That is because of its larger size: each CME contract represents five bitcoins, whereas Cboe’s represents just one. That means it will require more cash upfront to trade the CME contract.

But CME still faces many of the same hurdles as Cboe, including a reluctance of many banks and futures brokerages to touch the extremely volatile cryptocurrency, the report noted.

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RC

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