The CME Group announced today that bitcoin futures trading would launch by year’s end.
This will allow speculators to play bitcoin price movements without taking the counterparty risk involved in dealing with the new bitcoin exchanges.
Depending on the liquidity of the new futures instrument, speculators may also be able to avoid the high fees and large spreads present on some of the major crypto exchanges.
The new instrument will also allow owners of bitcoin to hedge their holdings. (The original purpose of the futures markets is hedging.) This new hedging ability may bring more players into the bitcoin space, if there is a group on the margins that was staying out due to lack of hedging.
It will be interesting to see if this group exists, because given how speculative bitcoin seems, I think the availability of hedging shouldn’t make a difference.
If nothing else, the introduction of the bitcoin futures contract will certainly mean more fees and commissions for the futures brokers! So that group will definitely win.
While I’m happy for everyone who’s made money on bitcoin, I remain skeptical about the asset and I’m unlikely to participate.
The main aspect of bitcoin that stops me is that loyalty to this particular crypto seems to be a requirement to its continued rise. Because there are low barriers to entry for an alternative crypto to be introduced or for an existing alternative to enjoy greater adoption, it appears to me that people’s attachment to bitcoin over other cryptos is arbitrary. I would be very interested if someone could change my mind on this. Comments requested!