Bitcoin, the sizzling hot cryptocurrency, topped $11,000 early Wednesday and is up more than 50% just this month, leaving investors to again ponder the fate of bitcoin ETFs. Money managers in the ETF industry are working on a bitcoin ETF, and the upcoming batch of cryptocurrency-related funds will likely track bitcoin futures.
Bitcoin’s new all-time high came just about 12 hours after the cryptocurrency smashed through the $10,000 mark that many analysts had been hyping for months.
The exchanges are working on bitcoin futures in response to rising demand to trade cryptocurrency-related products on a platform many traders are comfortable with. Additionally, a futures-backed bitcoin ETF would benefit the Cboe, which lists ETFs on its equities markets.
Derivatives help increase liquidity and improve markets for an asset category by allowing investors to bet on ups and downs of an asset, evening allowing individuals to adopt market-neutral strategies. They are also a key component in the creation of many futures-backed ETFs utilized by a range of investors.
“The assumption is that the trading of bitcoin futures will bring the next logical move: bitcoin exchange-traded funds, which will bring more attention to ETFs and further push legitimization of bitcoin,” reports CNBC. “These are technically listed as exchange-traded products, since they would only be trading a single commodity, in this case bitcoins.”
Recently, CME Group said it plans to launch bitcoin futures in the fourth quarter. The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. Bitcoin futures will be listed on and subject to the rules of CME.
CME Group and Crypto Facilities Ltd. also publish the CME CF Bitcoin Real Time Index (BRTI) to provide price transparency to the spot bitcoin market. The BRTI combines global demand to buy and sell bitcoin into a consolidated order book and reflects the fair, instantaneous U.S. dollar price of bitcoin in a spot price. The BRTI is published in real time and is suitable for marking portfolios, executing intra-day bitcoin transactions and risk management.
Previously, the “SEC concluded that bitcoin was an unregulated market, and because of that it would be unable to enter into surveillance agreements with other relevant agencies, such as the Commodities Futures Trading Commission and the Financial Industry Regulatory Authority,” according to CNBC.
For more information on the cryptocurrency, visit our Bitcoin category.