CBOE Global Markets Inc. recently announced the release of a Bitcoin futures exchange, which is set to begin trading at 6 pm on the evening of Sunday, December 10th, 2017. This is an exciting development to this sensational cryptocurrency. I’m sure you have heard about Bitcoin, and are aware of its incredible returns it has yielded in the past year. Before we discuss the new Bitcoin futures, let’s go over the basics of Bitcoin and why it has been the hottest thing in finance this year.
What is Bitcoin?
Bitcoin is the largest and most secure cryptocurrency in the world. The cryptocurrency was founded by the mysterious Satoshi Nakamoto (whose true identity has not yet been verified) in 2009. A bitcoin is simply an entry on a huge global ledger called the blockchain, the data base where every bitcoin transaction is recorded.
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 viewed by many as a superior alternative to modern currencies, which are created and regulated by governments. This definition article on blockchain will give you a good idea how Bitcoin works.
What are Bitcoin Futures?
A futures contract is a technique to hedge positions and reduce the risk of the unknown. It is also used for arbitrating between current spot and future contracts. In the case of Bitcoins, futures are more associated with miners who also face the risk of unknown future prices.
The futures will be cash-settled on the day following their expiry date based on the spot price of BTCUSD on the 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. Many investors may have an investment strategy that involves Bitcoin or is impacted by Bitcoin’s price movements, but the trading of actual Bitcoins on existing exchanges is risky and unregulated.
Safer Way to Speculate on Bitcoin
Bitcion futures will allow investors to speculate on Bitcoin without dealing with the risk of ineracting with the relatively risky and unregulated cryptocurrency exchanges and wallets. Bitcoin is also incredibly volitile, and the futures are expected to have significantly less volatility than the cryptocurrency itself. This will make it a more appealing investment to more retail investors who are looking to put their money into less volitile assets.
How To Trade Bitcoin Futures
Before trading them it’s important to understand your risk and to not trade based off emotion or fear of missing out. Here are two platforms and dates trading starts.
- December 10 Cboe begins trading Bitcoin Futures
- December 18 CME Group begins trading Bitcoin Futures
Trading Bitcoin, whether it’s on a cryptocurrency exchange or futures contracts can be risky if you don’t know what you’re doing and how to properly assess your risk. We will be looking at Bitcoin Futures in our trading room and ready if a good entry comes.
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