The Next Leg in Bitcoin’s Bull Market Is Coming as CME Announces Plans for Futures

Have you had enough of bitcoin’s relentless surge? Well, the digital asset is expected to get a whole lot more expensive now that the world’s biggest exchange has announced plans for bitcoin futures.

Peak Bitcoin? Think Again

In an apparent change of heart, CME Group Inc. has announced plans to introduce bitcoin futures by the end of 2017. The announcement came a month after the world’s biggest futures exchange dismissed any notion of entering the cryptocurrency space.

The move will allow institutional investors to get in on the world’s hottest asset class using a more conventional market tool. Futures are essentially financial contracts obligating the buyer to buy an asset or the seller to sell the asset. The futures market is largely tied to commodities, equities and Treasury notes.

CME Group’s foray into cryptocurrency is influenced by a recent decision by CBOE Global Markets Inc. to enter the market. CBOE has already announced plans to begin offering bitcoin futures contracts by early 2018. It is currently waiting approval from the Commodity Futures Trading Commission before moving forward.

According to Bloomberg, the CME futures contract will settle in cash and reflect daily price action from the CME CF Bitcoin Reference Rate. The Reference Rate is drawn from digital exchanges Bitstamp, GDAX, itBit and Kraken. Crypto traders will notice that Gemini is missing from the list. That’s because it has already entered into a deal with CBOE.

CME’s chief executive Terrence Duffy issued the following statement on Tuesday:

“As the world’s largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities.”

“Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,” Terry added, according to CNBC.

Bitcoin Climbs to New Record

Bitcoin climbed to new record highs on Tuesday, as investors rallied behind growing institutional demand for digital assets. BTC/USD peaked above $6,400 for a gain of more than 4%. At press time, it was trading around $6,379. The latest rally gave bitcoin a market cap of more than $106 billion. As a result, the total market capitalization for all digital assets above $182 billion for the first time.

As the world’s largest cryptocurrency, bitcoin has skyrocketed more than sixfold this year. Institutional investors have paid close attention to the rally, but have hesitated to enter an unproven market with little regulatory oversight. The introduction of a bitcoin derivative is a major step toward the development of bitcoin as a more established asset class. As such, investors can expect a favorable outlook as institutional cash enters the market.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi