Bitcoin futures maturing in January were at $18,450, with just 1,416 contracts traded as of late afternoon in NY, compared with 3,956 contracts on the first day. Traders bet on this and profit accordingly.
Wall Street investment firm Cantor Fitzgerald, as indicated earlier this month by the Commodity Futures Trading Commission (which oversees the USA market for derivatives), is preparing to create binary options tied to bitcoin. Not surprisingly, the CBOE's usage of the exchange platform Gemini, owned by the Winklevoss twins, may allow the newly minted "Bitcoin Billionaires" to further capitalize on the successes of the cryptocurrencies.
Bitcoin futures were already offered on some unregulated cryptocurrency exchanges outside the United States, but backers said the U.S. market debut would confer greater legitimacy on the volatile cryptocurrency and encourage its wider use. This protects them from any volatility in the real-time spot market.
The futures are cash-settled contracts, allowing investors exposure without having to hold any of the cryptocurrency. At the end of the day, more liquidity, particularly with the introduction of two-way trading via futures, shouldn't necessarily just inflate prices.
"Currently bitcoin is being used as a speculative asset and store of value".
Futures markets involve hedgers and speculators. "(Bitcoin futures) will speed up the march towards legitimisation of an asset class that only a few years ago many law enforcement agencies would have argued had limited legitimate reasons for people to use", said Jo Torode, a financial crime lawyer at Ropes & Gray in London. In a futures contract, when you buy something, you buy it with a promise to pay at a future date. A group of traders, major banks and brokers known as the Futures Industry Association has said the offering of Bitcoin futures contracts was "rushed", and there was not enough thought leadership concerning the inherent risk of trading Bitcoin futures on the CBOE.
One key requirement of futures contracts is that they must be traded on standardised exchanges such as the CBOE or CME. Even household names including Goldman Sachs have said they plan to clear Bitcoin futures on behalf of some clients.
On the flip side, the launch of Bitcoin futures will attract greater scrutiny from the regulators which will cast a shadow on the fate of the Bitcoin in the long run. CME Group is expected to launch contracts on december 18. "Keeping close tabs on social media and forums, futures positioning and other indicators can make a huge difference between making a proactive move or a reactionary one". In Korea, the Financial Services Commission financial regulator issued a directive that bans securities firms from taking part in Bitcoin futures transactions.
You can't do a bitcoin futures trade in India.
Perhaps more worryingly, the levels of futures trading has not been as high as the initial flurry of excitement may suggest.