Bitcoin Futures Are Paving the Way for ETFs

With the launch of Bitcoin futures, Chicago Board Options Exchange (CBOE) has allowed investors to associate with Bitcoin without actually buying or selling the cryptocurrency.

This move marks a significant milestone for the cryptocurrency industry as a whole. It also seems like it is just the beginning, seeing how it is one of many events planned for the near future, including but not limited to the anticipated launch of a bitcoin futures contract from CME Group next week.

This not only works for the futures contracts but could very well help bring about the notion of reliability and liquidity to the cryptocurrency world; specifically, the possible creation of a Bitcoin exchange-traded fund (ETF).

Edward Tilly, CBOE’s Chief Executive Officer, said in an interview that the exchange might use information obtained from this futures trading in order to assess their findings and share them with the Securities and Exchange Commission (SEC) to allow bitcoin-linked ETFs and exchange-traded notes (ETNs).

So is a Bitcoin ETF really happening?

The statement about the Bitcoin ETF by the CEO of CBOE is significant for the following reasons.

Firstly, what comes to mind is the financial benefit that could be gained from this. Global ETF assets have ascended to $5.3 trillion in this year’s bull market in October, from where they were at $4.8 trillion at the end of last year.

ETFs, to summarize, are tradable securities associated to a commodity, index, or basket of assets, and are available to be bought by retail investors. Bitcoin ETFs, in particular, could very well be an exciting opportunity for individuals who are attracted to the cryptocurrency’s price gains, but who are put off by the hazards of keeping and guarding it.

Secondly and most notably, this is not an out of air statement to take the first attempt at trying to establish a Bitcoin ETF. Therefore, it is of notable importance that hints at a serious consideration after how the SEC already rejected a proposed ETF by Gemini, the bitcoin exchange founded by Cameron and Tyler Winklevoss (which also has a multi-year license from CBOE to provide bitcoin data in the futures launched today). At the time, the regulator had cited the lack of other regulated bitcoin products, among their other concerns.

However, as several bitcoin futures are now live and in the works, being regulated by the Commodity Futures Trading Commission, this move could certainly work.

There has also been a previous effort by a CBOE subsidiary to convince the SEC to reconsider its decision. To this, Tilly stated that his company will be evaluating data about the liquidity, settlement process, and volatility spikes of the bitcoin futures in order to have possible conversations with the SEC. He further mentioned that this is just the beginning of their relationship with Gemini, which they hold very dear.

It is safe to say that after going through all of this information, the exchange wants to do more with its new data partner.

The Way Forward

According to Tilly, if the SEC is not willing to re-visit talks about a Bitcoin ETF at this point, there would be several other avenues to pursue. After the launch of the bitcoin futures contract, CBOE will be taking a measured approach in order to initiate other contracts as it has demonstrated in the past after being part of similar launches.

It could be easily deduced that the next possible step from here is to analyze the data from the Bitcoin futures contract, as means to what Tilly mentioned could ultimately turn into a derivatives offering on the futures contract.

Tilly mentioned that derivatives on Bitcoin will make sense at some point, even if that is beyond a month or two away. He further stated that additional business opportunities in the future include the addition of contracts on other cryptocurrencies.

While this is their first venture into Bitcoin, Tilly said, it does mean that other currencies will be excluded moving forward. As per Tilly, their relationship with Gemini allows them to think about any digital currencies that could meet the listing criteria, depending on what they learn from their first launch with Bitcoin.

In any case, it seems that Bitcoin and other cryptocurrencies will only move upward from here, which could only prove to be beneficial for the cryptocurrency community.

By | 2017-12-14T05:55:57+00:00 December 14th, 2017|Cryptocurrency News|0 Comments

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