The Chicago Board Options Exchange (CBOE), the largest US options exchange with an annual trading volume of around 1.27 billion contracts, will enable Bitcoin futures trading at 5 p.m CT on December 10.
Ed Tilly, the chairman and CEO of Cboe Global Markets, stated:
“Given the unprecedented interest in Bitcoin, it’s vital we provide clients the trading tools to help them express their views and hedge their exposure. We are committed to encouraging fairness and liquidity in the Bitcoin market. To promote this, we will initially offer XBT futures trading for free.”
Drastic increase in liquidity
Last month, Brian Armstrong, the CEO of the world’s largest Bitcoin brokerage and wallet platform Coinbase, revealed that at least $10 billion in institutional money are awaiting to be invested in Bitcoin and other cryptocurrencies. Armstrong wrote:
“By some estimates there is $10B of institutional money waiting on the sidelines to invest in digital currency today. When we speak with these institutions, they tell us that the number one thing preventing them from getting started is the existence of a digital asset custodian that they can trust to store client funds securely.”
With the scheduled launch of CBOE and CME Group’s Bitcoin futures exchanges on December 10 and December 18 respectively, large-scale institutional and retail investors in the traditional finance market will have a robust platform and infrastructure to invest in Bitcoin.
Over the past year, the market valuation of Bitcoin has increased from less than a billion dollars to $195 billion, without the involvement and entrance of large-scale institutional and retail investors, hedge funds, and investment firms. If Armstrong is right, the movement of tens of billions of dollars into this market would lead to a price surge for Bitcoin, as new investors from the traditional finance market reallocate their capital from conventional assets to Bitcoin. Indeed, Bitcoin’s price could grow exponentially, as predicted by billionaire hedge fund legend Mike Novogratz.
However, it should be noted that highly liquid regulated futures markets will make it much easier for large institutional investors to short Bitcoin. Though the contracts are cash-settled, major futures traders could likely move the underlying spot market. There exists the possibility that Bitcoin’s price could drop as a result of the futures markets opening.
CBOE partners with Gemini
CBOE will launch its Bitcoin futures exchange through a strategic partnership with US-based regulated Bitcoin and cryptocurrency exchange Gemini, operated by the Winklevoss twins.
Tyler Winklevoss, the CEO of Gemini, explained that the company has worked for several years to build necessary infrastructure for investors in the traditional finance market, and will continue to develop a regulated derivatives Bitcoin market. Winklevoss said:
“Developing a regulated derivatives market is the next logical and crucial step towards advancing the broader digital asset market. We have been working for years to build infrastructure to grow the digital asset market and today’s news marks a significant milestone.”
Upon the launch of CBOE and CME’s Bitcoin futures exchanges, many leading hedge funds including the Man Group, with over $100 bln in funds under management, will begin trading Bitcoin.