Say hello to trade, in the future though.
Bitcoins almost became a household name during the first half of December 2017, as the exponential rise in the price of Bitcoin caught everyone’s attention, it rose in value by an astonishing forty percent in about one day which amounted to 5000 dollars per Bitcoin. This phenomenal rise in price, however, was not out of the blue and people who were monitoring the activity closely benefited a lot from it and prospective investors are now viewing Bitcoins as a serious investment which could be considered in the future.
CBOE opened up Bitcoin for trading on the 10th of December 2017, it’s no coincidence that this fared with the simultaneous rise in the price of Bitcoin, with a higher level of investor confidence, Bitcoin sure seems to be a good option for the trade in the futures.
Chicago Board of Options Exchange received an overwhelmingly positive response on the bitcoin future investment venture at the opening day only, where the price of the Bitcoin in itself increased by about 26 percent.
What is Future Trading
A bitcoin exchange can be considered as a stock market like a place where the exchange allows transactions in both cash and bitcoins or sometimes only in bitcoins. The most equipped exchanges also provide an allowance to trade in different bitcoin currencies. The currencies are referred to as digital and fiat currencies. The rest is self-explanatory where buying requests are matched with seller requirements to proceed with actual transactions.
For all of you that are still at bay with what the term future means here, it means to trade any commodity at a speculated future value estimated by an investor at the time of purchase, this process is regulated via the Commodities Future and Trade Commission.
The future investment concept also allows an investor to acutely and proactively manage risk or expenses which require considerable spending, for example, oil/gasoline.
Applying the risk management part to the recent rise in the Bitcoin price, an investor naturally speculates that the price is bound to fall. When faced with such a situation an investor can use this concept to either make a gain at a set future date or be able to manage the loss better than others.
CBOE has listed three Bitcoin future options as yet which expire in January, February, and March. Each contract covers one Bitcoin and the final value is determined mirroring the price of the Bitcoin on the Gemini exchange on the last day of the contract.
CME launched one week later and has five Bitcoins instead of one as one contract unit. CME is also eventually settling investors in cash, but instead of taking value from the Gemini exchange, it will use the value on it’s on CF Bitcoin Reference Rate. The margin rate on this investment option is 35 percent which is not bad.
It’s a lucrative investment option as the set return margins are really high; the margin rate applied at all CBOE investments is set at 44 percent.
With all the hassle with bitcoin wallets and the aura of complication around that is also catered for as almost all contracts are on cash which means that CBOE does not have to set up its own Bitcoin wallet and handle a larger server, and it saves the investor’s time and effort in converting the Bitcoins into cash.
Anyone who wants to make the trade needs to deposit currency through wire transfer or a credit card approved by the exchange and a currency that is supported by the exchange.
This prevailing system makes it easier to perform transaction but the exchange charges a service fee, also a threat from hackers is something to be considered while choosing an exchange.
The overall risks are exceeded by potential benefits and it is reflected by all means. It also provides credibility to all market dynamics and future value determination.
This venture by CBOE is soon to be implemented to all other similar exchanges which means that the investor confidence is better than ever before. Cryptocurrency is here to stay and it may well be the future of all currency.
This belief has also been reinstated by the skyrocketing spot price per Bitcoin which is also a favorable indicator of the whole situation being very investor friendly promising great yields.
Considering that investor confidence is soaring it also means that there is a very large number of new investors coming in, the stats which are being monitored showed that up to 300,000 users joined in a space of five days during the 22 to 26 November period.
Large market players in the wall street have given a positive nod to launching similar ventures soon so the exceedingly large investor pool won’t be a problem to manage, with a healthy competition in the industry and the presence of such large investment portfolios the future only seems brighter.
Since the exchanges of the world have allowed future trading in the cryptocurrency, there is a steep fall and sharp hike seen in the prices of the bitcoin, making it a volatile market for the interest of the traders. With future exchanges allowing the trade, there are speculations of big giants like JP Morgan and other multinational firms to let their customers invest in the market.