Bitcoin takes a big stride away from fringes of finance

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Bitcoin takes a big stride away from fringes of finance

Bitcoin’s value surged past $7000 on November 2 setting a new high on the back of news that CME Group will offer a futures option later this, the move may be a pre-curser to Bitcoin becoming an exchange-traded fund and acceptance by mainstream finance

CME Group’s October 31 announcement to offer futures on Bitcoin this month sent the cryptocurrency surging past $6,400. The move brings Bitcoin closer to mainstream finance, placing it alongside CME’s futures on interest rates, indices, commodities and currencies.

Bitcoin’s price has soared. It started the year at $966, broke $5,000 on October 11 before settling at $6,362.65 on October 31.

Futures are derivatives contracts that investors typically use to speculate on prices or hedge risk against turns in the market. Other major markets like stocks, bonds, commodities and currencies all have derivatives based on them. CME’s futures option would allow investors to hedge that Bitcoin’s price will rise, something that is difficult at present.

Bitcoin price index based futures contract

The move is significant because CME Group is the world’s largest derivatives exchange. CME explained that the futures will be cash-settled and based on their CF Bitcoin Reference Rate.

The news comes as a surprise because in September CME president Bryan Durkin told Bloomberg: “I really don’t see us going forward with a futures contract in the very near future.”

However, Terry Duffy, CME Group chairman and chief executive officer, explained that they were simply responding to increased interest in Bitcoin and that the new vehicle “will provide investors with transparency, price discovery and risk transfer capabilities.”

Garrett See, DV Chain CEO told CNBC that CME’s announcement showed “cryptocurrencies are gaining more legitimacy in the financial marketplace. It’s really exciting. I think it’s going to bring a lot of liquidity.”

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