CME Group to Launch Bitcoin Futures Contract


Since past few weeks, Bitcoin seems to be on a record-breaking trend and is inching towards new highs with new optimism circulating around the largest cryptocurrency by market value.

The largest exchange owner in the world just reversed its previous stand on Bitcoin.

The cryptocurrency jumped almost 5 percent to as high as $6,420 after the announcement.

CME Group Chairman and CEO Terry Duffy said in a statement the company's decision was driven by the "increasing client interest in the evolving cryptocurrency markets".

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The new bitcoin futures contract will be cash-settled and based on the CME CF Bitcoin Reference Rate (BRR), which CME started in 2016. The reference rate is a daily settlement price published at 4 p.m. London time, now noon ET. The derivatives exchange, which already has a bitcoin index, plans to unveil bitcoin futures in Q4 2017 as long as they clear the proper regulatory channels. In addition to the CME, the CBOE previously unveiled plans to launch bitcoin futures contracts on a similar time table.

With Bitcoin futures becoming mainstream, the next logical step seems to be a bitcoin exchange-traded fund, as the Securities and Exchange Commission (SEC) had cited the lack of derivatives as one of the reasons for rejecting approval of the funds.

The growth of bitcoin derivatives is also another step towards the development of the digital currency as a more established asset class. Fundstrat's Tom Lee said his call for bitcoin to top $20,000 by 2022 is based partly on expectations that bitcoin derivatives products will launch.

Ari Paul, CIO and managing partner at BlockTower Capital, says "The addition of CFTC-regulated bitcoin derivatives will bring a great deal of liquidity and legitimacy to the cryptocurrency ecosystem". While some are highly pessimistic others have preferred to grow with the optimism.