“Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” – Thomas Carper, US-Senator
If you are still not sure what Bitcoin is, I have linked an article here written by BlockGeeks that does a fantastic job of detailing crypto-currency. Cryptos have been a hot topic lately with many people embracing them and trading cryptos on unregulated exchanges. Cryptos also have drawn skepticism and hesitation by investors, with an abundance of people believing it’s just a bunch of smoke and mirrors that won’t ever become influential or that holds no real value. The reality is that crypto-currencies are real and there are opportunities to be had regardless of which side you fall on.
At the time of this writing, Bitcoin, the most popular and recognizable cryptocurrency, is trading at $8,229.96. Bitcoin was only trading at around $800-$1,150 at the beginning of January, 2017, clearly showing incredible growth to $8,229.96 per coin in less than a year. Just about every financial professional has an opinion on what way they believe the future of crypto-currencies like Bitcoin will entail, with some like Jamie Dimon, CEO of JP Morgan believing it is worthless and in a bubble and others believing it is a legitimate financial tool that will change the way transactions are done in the future. Some professionals are confident that Bitcoin will continue to rally up and will eventually be an accepted and common source of currency. Others are hesitant and believe there is a crypto-bubble incapable of being sustained that will come crashing down. If you have done your research and chosen a side, then there is a market opportunity for you to take advantage of once Bitcoin Futures contracts are available to be traded at the CME.
There are three main benefits of trading the new Bitcoin Futures contract as opposed to buying bitcoin over the counter at an unregulated exchange. First, Bitcoin Futures offered through the CME will mean there are regulated entities between the customers, which means regulated institutional investors will be able to participate in the crypto-market, something many have not been able to do, which will add liquidity and reduce risk. Second, if you have money invested currently in Bitcoin you can utilize the futures market to hedge your risk. This way even if the market drops – you could potentially end up unscathed and protected against the downside risk. This also applies to people who are not currently invested in bitcoin and who fear there is a bubble and would like to short Bitcoin. The ability to hedge risk and to go long or short the market allows traders more flexibility and makes Bitcoin Futures more appealing than over-the-counter bitcoin exchanges. Third, if you want to begin trading bitcoin and believe it is going to keep increasing you can utilize the leverage granted in the futures market and invest for less capital (Keep in mind that there are risks involved and potential for loss if your risk is not managed properly. Risk management is always critical). All three benefits mean that Bitcoin being offered as a futures contract can be a new and exciting way to trade crypto-currencies and can be a way for current crypto-traders to enter the futures market.