Bitcoin has surged in value by around 555 percent so far this year. With bitcoin futures, hedge funds and investment banks the chance to hedge against the volatility in the bitcoin price, which they are sure to capitalize on given the erratic price swings that bitcoin has experienced of late as regulatory frameworks take shape around the world. This jump to a new all-time-high comes within a week's time after Bitcoin touched $6250 high amidst rumours of China cancelling its ban of its local exchanges and cryptocurrency trading platforms.
The creation of bitcoin futures by the CME Group could finally make it possible to establish an exchange-traded fund that's based on the world's most popular cryptocurrency, which has been previously hard due to bitcoin's largely unregulated nature.
Futures will be settled in cash based on a Bitcoin index that CME started calculating in November. The reference rate is a daily settlement price published at 4 p.m. London time, now noon ET.
Even before the CME Group's decision to launch bitcoin futures, bitcoin trading has already been happening.
The acceptance of trading in Bitcoin derivatives with give a big boost to the development of digital currency and help it to get established as a more legitimate asset class in mainstream finance. This also means that the Securities and Exchange Commission (SEC) will review future applications for Bitcoin ETFs that trade in futures contracts.