Daily Management Review

‘Big Institutional Investors’ Could Be Drawn To The Debut Of The 2nd ‘Bitcoin Futures’


The trading volumes in the crypto-currency market seem to be on the rise, yet the analysts continue to draw our attention to its volatile nature and the underlying “unregulated” cash market. Nevertheless, the bitcoin futures are growing in numbers and are likely to bring in the “big institutional investors”.

‘Big Institutional Investors’ Could Be Drawn To The Debut Of The 2nd ‘Bitcoin Futures’
On Sunday, 17 December 2017, the “largest derivatives” exchange operators in the world, the CME Group Inc has launched “its own contract” for betting on the crypto-currencies, whereby raising investors’ expectation on the future Bitcoin volumes to “perk up”.
The launch of the “second U.S. bitcoin futures” is speculated to be yet another step taken to show that the “big institutional investors” are “warming up” towards “a volatile asset” which only a recent while ago accessible via “largely unregulated markets”. Following the last week’s “futures contract” launch by “Cboe Global Markets”, CME will go “cash settled”, although several crypto-currency exchanges’ data index will determine its price, “instead of just one”.
In the words of the Chief investment Officer of Altegris, Matt Osborne:
“The CME contract is based on a broader array of exchanges. So there is a possibility that the CME contract may generate more interest and more volume.”
Altegris is a California’s San Diego based “$2.5 billion alternative investments provider”.
While Reuters added:
“The January CME contract will trade on.”
Bitcoin’s “eye-popping” gains in value have been an investor’s lure which has also retained its “notoriously volatile” nature. Several “digital currency wallets” and bitcoin exchanges have been the victims of “outages, denial-of-service (DDoS) attacks and hacks”. According to Reuters:
“Bitcoin hit another record high on Friday near $18,000 on the Luxembourg-based BitStamp platform, and has soared roughly 1,700 percent so far this year”.
While, the bitcoin futures of Cboe shot up 20% higher in the beginning of this week as they debuted and secured over “4,000 contracts” changing hands by “4:15 p.m. EDT settlement”. The volumes, however, in the trading of the one month contract came down to “1,500 contracts” the following day and by Friday, it hit a stable ground at around over a thousand contracts.
On the other hand, the “Cboe volatility index futures”, reports the market participants, has a typical run in the “tens of thousands to more than 100,000 contracts”. However, the volume decline wasn’t an unexpected affair for the analysts as they maintained their “concerns about the cryptocurrency’s underlying volatility”.
According to some of the investors’ the “CME bitcoin futures” could hype up “institutional demand” given the fact that it arrives at its “final settlement price” after harvesting data from “multiple exchanges”.
In order to make sure to retain a cautious market sentiment in general, the contracts put up “margin requirements” which in the “futures market” means the “initial deposit” for entering into a contract. CME’s margin requirement stands at 35% while at Cboe the same is at 40%, whereby highlighting the volatile nature of the crypto-currency.
While, the Chef Market Intelligence Officer at the “U.S. Commodities Futures Trading Commission”, Andrew Busch, draws our attention on the unregulated cash market that underlies for bitcoin and stressed that:
“It’s important to keep that in mind when (investors) are trying to make a decision”.
Some of the analysts think that bitcoin futures will still have to wait before taking off “in a big way” given the lack of the “history of data in the contracts which needed to “identify trading opportunities” through “quantitative systems”. Moreover, Matt Osborne from Altegris also said:
“Volumes are going to slowly increase as professional traders get comfortable with the price action and more importantly get comfortable with the volatility and the margin usage”.