Repost by bitcoin.info: what to expect from bitcoin futures: expert #blog
just a week ago, the #chicago
board of #exchange
(cboe) opened up its doors to trading bitcoin futures (xbt), and wrapped it up with a 17% gain on the january contract. its larger, cross-town rival, the chicago mercantile exchange (cme) just launched its own bitcoin futures trading today. this has been fairly big #news
in the bitcoin community, but many are still scratching their heads trying to make sense of it all. in this expert blog column, i attempt to explain what the implications are of these monumental events.
first, let’s take a step back and define what a futures contract is. a futures contract is simply a contract to buy or sell a #financial
instrument or other underlying asset at a predetermined price in the future. they can be settled by the physical delivery of the underlying goods, or in cash.
in other words, one party is speculating on the increase of the value of the underlying asset, and the other is hedging against the potential loss of value of it. the futures contract rewards the #party
that makes the most accurate prediction of the future value of the underlying asset.
so what does this mean for bitcoin?
in the case of bitcoin, a futures contract would allow two parties to speculate or hedge on the price of bitcoin at some #point
in the future.
the important part of the above are the parties that would be speculating or hedging. futures contracts are largely trade agreements for experienced #traders
and institutional #investors. by allowing for these #contracts
to be traded in a #regulated
have both opened up the doors for such traders to participate in the bitcoin game and indirectly legitimize it as an asset class.
in mind that because these contracts are settled in cash, the #funds
are not actually used to buy the underlying asset, #only
to speculate on its #price
movement. as such, introducing bitcoin futures trading doesn’t necessarily directly improve the #capital
flow of wall st. #money
into #bitcoin, but it can be expected to have tangential effects. #bitcoininfo #bitcoins #cryptocurrency