CNBC reports that investors will now have a new way to be on bitcoin as futures trading on the wildly popular cryptocurrency will begin Sunday. The launch will be another chapter in the wild ride that has been bitcoin trading.
The volatility of bitcoin trading has been well chronicled in recent weeks. The coin has almost doubled in price since the investors beginning of the month but has also had says that have seen the coin lose as much as 20% of its value.
Many market experts are quite excited about the fact that investors will now have an alternative to bet for or against Bitcoin that is regulated. However, many of these experts warn against the risks associated with bitcoin for both and the organizations that will back these trades.
The futures will be based on present auction prices on the Gemini exchange and will be traded in U.S. dollars. This will be in sharp contrast to the current trading of bitcoin by largely unregulated platforms that have been plagued by both fraud and issues pertaining to cybersecurity.
Randy Fredrick, an industry insider with Charles Schwab of Austin, however, credits the futures launch with opening the bitcoin market to a large number of new investors.
Bank and brokerages however have been lukewarm in their reaction to the futures launch. Some Brokers plan to provide customers with the opportunity to invest in bitcoin when trading starts Monday but have limited trading options and set margin requirements. Some online brokers such as Charles Schwab and TD Ameritrade have chosen not to facilitate trades of bitcoin futures from day one.
Likewise, some major U.S. banks, including Citigroup and JP Morgan Chase have chosen to not initially clear trading on bitcoin futures.
The Goldman Sachs Group plans to allow trading in bitcoin futures for select clients only.
Bitcoin’s manic performance has raised volatility to levels that are problematic for some. Industry analyst hope that the futures launch will calm this volatility. The thought here is that the involvement of major institutions will have a positive effect on long-term volatility. Many insiders do not expect to see this volatility calming effect in the first month or two.
Fredrick chimes in with the reminder that bitcoin is ‘unknown territory’ and suggests that no one can truly predict what the impact of futures will be on the volatility of bitcoin trading. Brokers have expressed that more safeguards would be necessary to protect against the cryptocurrency’s volatility.