Bitcoin futures start regulated trading among pros, cons

Bitcoin futures began trading on a major financial exchange in Chicago this week for the first time, allowing the market to bet on whether the future price will rise or fall.

It was a busy afternoon of trading at the Chicago Board Options Exchange (CBOE), one of the largest futures exchanges in the world and the first exchange operator to offer trade on Bitcoin futures. Although the trading floor is focused on more traditional assets, across the room, there was an altogether different option available for traders.

“We’re excited about the launch of Bitcoin futures. It is one of our most successful brand new products ever. With any new product, there is always a span of time to develop volume, contracts traded in the product. But we’ve seen great interest in this. The interest has been across the board from different types of market participants, large firms, all the way down to individuals. And we see it coming from the U.S., from Europe and from Asia. So we like that breadth of participation,” said John Deters, CBOE chief strategy officer.

Bitcoin futures are derivatives and not factual Bitcoins proper. Investors buy and sell their futures contracts to bet on future directions of price movements for the digital currency, which some have claimed to be on the verge of bursting as a bubble.

The first day of trading did not fare smoothly with the exchanges halted twice to stem volatility.

But pundits like the vice president of Cryptocurrencies at Trading Technology believe the trading of Bitcoin futures on regulated exchanges would help encourage investment in digital currencies.

“It’s the only legitimized asset to us being at the exchange because it now offers people a more traditional way to invest. It also may indicate to people that this really is the kind of asset that you’d want to have some percentage of your portfolio or your wealth diversified into. And it’s now at an exchange that has an established reputation. So I think that has brought a lot of new people into this space,” said Michael Unetich, vice president with Cryptocurrencies at Trading Technology, a company that specializes in vendor exchange softwares.

Though the Chicago Mercantile Exchange was set to launch its Bitcoin futures on Dec18, skeptics still continue to warn that trading in underlying assets like Bitcoins could further balloon this financial bubble and should it burst, it would wipe out billions if not trillions of wealth.

Advocates of digital currencies argue back with their market trend projections.

“I think either Bitcoin or some other cryptocurrency will exist 10 years from now and we may very well be buying all of our goods and services with that type of currency. Do I think that will happen in 10 years time or 20 years time, I don’t know. But I think it’s certainly possible,” said Steven Todd, a professor with the Quinlan School of Business at Loyola University Chicago.