Bitcoin Futures Set To Launch Sunday, December 10th

After gaining regulatory approval from the CFTC, CBOE Global Markets Inc. has announced the release of a Bitcoin (BTCUSD) futures exchange set for 6 pm on the evening of Sunday, December 10th, 2017.

The futures will be cash-settled on the day following their expiry date based on the spot price of BTCUSD on the New York-based Bitcoin Gemini Exchange. To encourage the rapid development of the market, the Bitcoin futures will be exchanged free of charge for the month of December.

By this point most people have heard of Bitcoin and have some concept of what it is, but may still be fuzzy on the exact details. Considering that these Bitcoin futures are intended to make Bitcoin trading accessible to the average retail investor, it is important that people fully understand what Bitcoin is and the relation that Bitcoin futures will have with the original Bitcoin.

What Is Bitcoin?

Bitcoin is a distributed digital ledger system that records the ownership of a purely digital currency, the Bitcoins themselves. The revolutionary concept behind Bitcoin is that the creation and ownership of the currency can be tracked by a decentralized system that is open to anyone and, theoretically, impervious to tampering or manipulation. This is a direct contrast to modern currencies, which are created and regulated by governments.

The debate about the usefulness of Bitcoin as a means of exchange and a store of value is still raging, but that has not stopped Bitcoin from increasing in value by over 1000% in the last year.

The greatest natural demand for Bitcoin so far has been as a store of value in countries with runaway inflation or with strict capital controls, but many also argue that much of Bitcoin’s rapid rise in price is the result of speculation.

However, speculation is not necessarily always wrong, and many pundits are calling for a final Bitcoin price in the 10s of thousands or even millions of dollars.

The Impact of Bitcoin Futures

It is this backdrop that makes Bitcoin futures such an attractive proposition. Many investors may have an investment strategy that involves Bitcoin or is impacted by Bitcoin’s price movements, but the hurdle of trading actual Bitcoins on existing exchanges is too high.

Futures contracts allow for a much more liquid market full of both buyers and sellers, which will allow Bitcoin investors to trade in an environment with greater security and with lower volatility, as Bitcoin exchanges are still considered to be lightly regulated and prone to episodes of sharp volatility when compared to traditional exchanges and securities.