The world’s largest derivatives exchange operator launches bitcoin futures

The cryptocurrency is making steady gains towards legitimacy, a move which is likely to draw attention of institutional investors.

The bitcoin hit yet another milestone with the CME Group, the world’s largest derivatives exchange operator, launching trading in bitcoin futures.

This step towards legitimacy is likely to attract large institutional investors towards it. Trading on Sunday opened at a high of $20,650 and within the first 30 minutes it dipped by 6% to a low of $19,290.

According to CME, the reference price, from which price limits are set, is $19,600 for February contracts, $19,700 for March and $19,900 for June.

With the price of bitcoin touching $19,290 on CME, new contracts were below the $19,500 reference price set by it for January contracts.

“We saw a nice open on light volume, but pretty uneventful so far. I do think we could certainly pick up in volume as Asia begins to open. This is a brand-new asset class and I think perhaps a lot of investors want to sit back and see how this plays out before dipping their toes in this market,” said Spencer Bogart, partner at Blockchain Capital LLC.

On the debut of trading on futures on CME, nearly 4,000 contracts were traded in the full session.

Incidentally, last week, with Cboe Global Markets, a Chicago-based derivatives exchange, launching bitcoin futures, the price of bitcoin jumped nearly 20% in its debut.

Investors believe, the CME bitcoin futures is likely to attract institutional attention since the final settlement price is culled from multiple exchanges. The Cboe futures contract is based on a closing auction price of bitcoin from the Gemini exchange, which is owned and operated by virtual currency entrepreneurs Cameron and Tyler Winklevoss.

With regard to bitcoin, the general sentiment on the market is that of caution, which has been reflected in margin requirements for the contracts.

As far as the futures market is concerned, margin refers to the initial deposit that has to be made into an account in order to enter into a contract.

CME’s margin requirement is 35%, while at Cboe, it is 40%. Both go to reflect bitcoin’s volatility. In comparison, the margin for an S&P 500 futures contract is just 5%, said analysts.

As per a futures trader, the average margin for brokers was roughly twice the exchange margins.


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