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ErisX Launches Physical Bitcoin Futures in USA

  • ErisX becomes the second officially regulated and compliant Physical Bitcoin Futures Exchange in the US

Bakkt launched the first Physical Bitcoin Futures exchange, meaning that Bitcoin futures contracts could be redeemed for actual Bitcoins when the expiration date is reached. However, Bakkt now has some competition, with ErisX launching Physical Bitcoin Futures as of 17 December. Also, ErisX is only the third officially regulated venue to have Bitcoin Futures of any form, alongside Bakkt and the Chicago Mercantile Exchange (CME).

Notably, although the ErisX Physical Bitcoin Futures have launched, they will not be available through merchants or brokerages until early 2020. That being said, that date is only weeks away. Essentially, ErisX is waiting for liquidity to grow before going fully public.

Aside from the new Physical Bitcoin Futures product, which was made possible by the Commodity Futures Trading Commission (CFTC) granting them a Derivatives Clearing Organization license, ErisX also offers spot trading services in 44 states. The new platform was originally launched by Eric Exchange, which is a derivatives market provider for classical assets that was founded in 2010, and it seems the plan for ErisX was to provide crypto derivatives as soon as the regulatory situation became favorable.

 

Overall, this news is another step towards the institutionalization and maturation of the crypto space.

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Bakkt Plans Cash-Backed Bitcoin Futures Based in Singapore

Bakkt is now planning on launching cash-backed Bitcoin futures that will be based out of Singapore. However, these cash-backed Bitcoin futures will be available to traders worldwide including the United States.

Apparently, there is strong customer demand among the Bakkt user base for cash-backed Bitcoin futures, meaning that the futures contracts settle for cash and involve no actual Bitcoin. It is based on this customer demand that Bakkt has decided to launch its latest product.

Bakkt, a subsidiary of the Intercontinental Exchange (ICE), which is the parent company of some of the biggest stock and futures exchanges in the world, recently launched physical Bitcoin futures in the United States. Physical Bitcoin futures means that the futures contracts settle for actual Bitcoins, and therefore physical Bitcoin futures can have an impact on the spot Bitcoin market. Bakkt physical Bitcoin futures are the first of its kind.

Notably, the Chicago Mercantile Exchange (CME) already offers cash-backed Bitcoin futures and has become extremely popular, with volumes approaching the level of top spot cryptocurrency exchanges. When Bakkt eventually launches cash-backed futures, which may happen before the end of this year, CME will finally have some competition in the cash-backed Bitcoin futures sector.

 

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Bitcoin Futures

CME: Bitcoin Futures Interest Still Strong

Bitcoin Futures

The Chicago Mercantile Exchange Group (CME) has expressed belief in the Bitcoin Futures market despite the recent price tank. The Illinois-based derivatives exchange is heavily interested in the capabilities of the cryptocurrency and has tweeted in support of the premier cryptocurrency of the world.

Despite the pullback in bitcoin prices, customer interest in CME Bitcoin futures remained strong during Q3 with daily OI of over 4.6K contracts, up 61% vs Q3 2018. https://t.co/MiMqZ52JmS pic.twitter.com/WiQBA0mK0o

— CMEGroup (@CMEGroup) October 9, 2019

In a rather unusual move, the CMG took to the microblogging site to express hope for the future of the cryptocurrency. The exchange itself offers Bitcoin futures trading and reported in the same tweet that “CME Bitcoin futures remained strong during Q3 2019, with daily open interest (OI) of over 4,600 contracts, up 61% vs Q3 2018”.

Open interest is a financial term for futures contracts that have not been settled. Bitcoin futures contracts rose to 4,629 contracts up from 2873 during the last quarter despite the recent price tank in the price index. Over 34,000 contracts were traded in May alone which are worth USD 1.3 billion, sizeable figures considering the nascent nature of the Bitcoin futures market.

However, despite the positive attitude, CME has categorically negated the impression that it wants to launch physically settled Bitcoin futures contracts. The market is instead only offering contracts settled in cash.

 

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How CME, NASDAQ, and Bakkt Bitcoin Futures Impact the Bitcoin Market

What Are Bitcoin Futures And How Do They Impact The Bitcoin Market?

A futures market offers traders the ability to bet on whether the price of an asset, such as precious metals, commodities, or stocks, will go up or down in the future. Specifically, a futures contract is an agreement to buy or sell an asset for a predetermined price at a precise time in the future.  If the price of the asset goes up during the lifespan of a futures contract then the trader makes a profit. This is because the trader gets to buy the asset at a lower price than the asset’s true value when the futures contract expires. 

Also, futures markets can be used for hedging risk. For example, if a business uses gasoline to power its fleet of trucks, and a price rise is expected, then that business can buy a gasoline futures contract. Rising gas prices make it more expensive to operate the fleet of trucks, but this expense is negated by profits earned from the futures contract. Thus, trading futures contracts can lessen the blow of adverse price movements when operating a business. 

CME and CBOE Cash-Backed Bitcoin Futures Have Hurt the Bitcoin Market

The first official Bitcoin futures market in the United States launched in early December 2017 on the Chicago Board Options Exchange (CBOE), and the Chicago Mercantile Exchange (CME) launched the 2nd Bitcoin futures market shortly afterward on 17 December. The CBOE Bitcoin futures market has actually closed down due to lack of trading activity, likely due to the CME Bitcoin futures becoming extremely popular and overshadowing CBOE. For example, when CBOE announced the closure of their Bitcoin futures in March 2019, CME was seeing USD 90 million of trading volume per day with CBOE only having USD 8 million of volume. In May, CME saw daily Bitcoin futures trading volume in excess of USD 500 million. 

CME Bitcoin futures is one of the top choices for institutional traders that want to buy and sell Bitcoin. This is because CME Bitcoin futures are officially regulated, can handle high volumes, and there’s no risk of Bitcoin being stolen because the futures are backed by cash, with no actual bitcoins involved. 

Therefore, CME Bitcoin futures provide a conduit for institutional investors with deep pockets to get involved in the cryptocurrency market. However, institutional demand flowing into the CME Bitcoin futures market does not increase demand in the Bitcoin spot markets, since CME Bitcoin futures do not use actual bitcoins. Instead, the CME Bitcoin futures are actually diverting demand away from the Bitcoin spot market, as well as inflating the Bitcoin supply since the futures contracts are essentially equivalent to paper bitcoins. 

Although the diversion of demand away from spot markets and the printing of paper bitcoins already theoretically cause Bitcoin’s price to be lower than it would be if the CME Bitcoin futures did not exist, the worst thing is that CME introduces massive short-selling pressure into the Bitcoin market. The Federal Reserve posted a statement indicating that the 2018 bear market was likely initiated by the launch of the CME Bitcoin futures, and it is apparently quite common for an asset to crash in price when a futures market is launched for the first time. Indeed, the day of the CME Bitcoin futures launch, 17 December 2017, was the same day that Bitcoin hit its all-time high and began to crash.

The reason it is possible to short on a futures market is that traders can buy Bitcoin futures contracts with funds from a margin loan, and then sell the Bitcoin futures contracts immediately. If Bitcoin’s price declines during the contract period, then the traders can buy back the Bitcoin futures contract at a lower price when the contract expires, leaving behind a tidy profit in their account. 

Essentially, it was just about impossible for institutional investors to short Bitcoin before the CME and CBOE Bitcoin futures launched, and institutional investors generally only had the option to buy and sell spot Bitcoin. The CME and CBOE Bitcoin futures gave institutional investors the capability to truly short Bitcoin for the first time.

Aside from helping to precipitate the 2018 bear market, the CME Bitcoin futures influence the Bitcoin market on a month to month basis. An analysis shows that the price of Bitcoin often pivots, i.e. reverses its trend, when the monthly CME Bitcoin futures expiration occurs. This may represent CME Bitcoin futures traders collectively deciding to go short or long at the beginning of a new monthly contract period. 

For example, in late June 2019, as Bitcoin recorded a new 2019 high of USD 13,800, CME Bitcoin futures traders began to collectively open short positions for July. Interestingly, institutional traders were mostly going short, while small traders were going long and expecting the Bitcoin rally to continue. Ultimately the institutional traders on CME ended up being correct, with Bitcoin declining as low as USD 9,000 during July. 

Therefore, it is important for Bitcoin traders to be aware of CME Bitcoin futures expiration dates since it might herald a change in the market trend. 

Bakkt Physical Bitcoin Futures, Will They Ever Launch?

While CME Bitcoin futures are cash-backed and seem to have an overall negative influence on the Bitcoin market, it is possible that one day physical Bitcoin futures will launch on Bakkt. Physical Bitcoin futures would provide a safe and efficient conduit for institutional traders to get involved in the Bitcoin market, while simultaneously increasing spot Bitcoin demand since for each futures contract purchased on Bakkt there are actual bitcoins backing it.  

The launch of Bakkt physical Bitcoin futures has been delayed several times since 2018 due to regulatory concerns. Specifically, the Commodities Futures Trading Commission (CFTC) has delayed Bakkt because it wants to custody the Bitcoin on behalf of its customers, while generally, futures markets in the United States use a 3rd party qualified custodian. 

As of late July, Bakkt has begun testing their physical Bitcoin futures, but there is no official launch date, which is unfortunate considering that the Bakkt physical Bitcoin futures would likely have a positive impact on the market. 

NASDAQ Bitcoin Futures, More of the Same?

In 2018 NASDAQ, which is one of the biggest stock exchanges in the United States, announced that they would launch Bitcoin futures in the first half of 2019. Just like with Bakkt, NASDAQ seems to have missed its target launch date due to CFTC regulatory concerns. 

BREAKING: BTC is now being traded on the Nasdaq! I bought one BTC through my TDAmeritrade account! According to the chart it started trading April 10, 2019!! Other digital assets are soon to follow!! 🚀🚀🚀pic.twitter.com/1VgE1Whoa4

— Cryptopolis (@cryptopolis_x) April 22, 2019

In April there was speculation that NASDAQ had begun testing a Bitcoin-based product under the symbol CXERX. It is unknown if this was the Bitcoin futures product or something else since NASDAQ did not disclose any details about it. 

As of now there is no publicly disclosed launch date for NASDAQ Bitcoin futures. More importantly, it seems that the NASDAQ Bitcoin futures will be backed by cash like CME. Although NASDAQ Bitcoin futures would provide a conduit for institutional traders to enter the Bitcoin market, this could end up adding to the negative effects of the CME Bitcoin futures. 

In summary, Bitcoin futures like those on CME offer institutional investors an easy way to enter the Bitcoin market, which has caused the CME Bitcoin futures to become quite popular. NASDAQ wants to get in on the action and launch their own Bitcoin futures markets. Unfortunately, it seems the cash-backed nature of CME Bitcoin futures has damaged the Bitcoin market via diverting demand away from the spot market, introducing massive short selling pressure, and printing paper bitcoins. If NASDAQ Bitcoin futures do eventually launch it could be more of the same. It seems the greatest hope for the Bitcoin market is Bakkt physical Bitcoin futures since they would provide a conduit for institutional investors to increase spot market demand. Unfortunately, regulators are making it difficult for Bakkt’s physical Bitcoin futures, and there is no sign that they will launch anytime soon. Perhaps Bakkt will eventually launch and help negate some of the damage caused by the CME Bitcoin futures. 


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Interest in CME Bitcoin Futures Reach All-Time High

Interest in CME Bitcoin Futures Reach All-Time High

The Chicago Mercantile Exchange (CME) data shows that the interest in Bitcoin futures trading is now at an all-time peak as Bitcoin enjoys a renewed interest in the markets.

The Twitter post by CME revealed this week that interest has peaked with an all-time high of 5,311 contracts totaling 26,555 BTC, or approximately USD 247 million at press time. Bitcoin is currently trading at USD 9,292.60.

An encouraging word from CME for the markets is that the long await interest in institutional investors appears to be gaining ground; an observation also shared by JPMorgan Chase (JPM) executive Nikolaos Panigirtzoglou who said that such investment was beginning to impact on Bitcoin markets.

Facebook’s announcement of its own cryptocurrency development has the potential to boost market interest and has had major news coverage this week. Many analysts are reporting that Libra Coin coverage is pushing Bitcoin’s current bull run, although legislators in Washington have expressed that they are ready to step in and regulate the social media giant prior to any product launch.

From next week, Chicago Mercantile Exchange (CME) will be the only US regulated platform issuing Bitcoin futures but London broker TP ICAP has said that it will be trading cash-settled contracts shopped on that platform with the Bitcoin derivatives market also gaining interest globally.

Bitcoin futures are standardized contracts that bind a party to buy or sell Bitcoin at a predetermined date.

 

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London Broker Chooses Crypto Derivatives Market as Safe Zone

London Broker Chooses Crypto Derivatives Market as Safe Zone

A major London broker is now moving into Bitcoin after losing 36% of its market value in a day’s trading in 2018.

The company, a division of the world’s biggest interdealer broker TP ICAP has been wooed by the advantages of trading in Bitcoin and has become an intermediary to those wanting to trade in Bitcoin futures as well as planning to add non-deliverable forwards tied to the digital asset.

The 36% loss of the company’s market value over 24 hours of trading was enough to provoke the London brokerage to look for another way of doing business, and the derivatives market clearly looked like an option. Simon Forster, overseeing TP ICAP’s move into crypto, thinks that now is the time to make the move:

“We want to be close to what’s happening within this nascent asset class because we believe it’s important to invest in the early stages of a growing market… TP ICAP also understands that this technology could disrupt or impact other asset classes where we currently operate, so we feel it’s important to be informed.”

Although London has been chosen for its launch into Bitcoin futures support for its customers the company has plans to expand services to the US and in Asia. From next week, Chicago Mercantile Exchange (CME) will be the only US regulated platform issuing bitcoin futures, but TP ICAP has said that it will be trading cash-settled contracts shopped on that platform.

 

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Bakkt Sets Date for Bitcoin Futures Trial

Bakkt Sets Date for Bitcoin Futures Trial

Crypto trading for institutional clients platform Bakkt has announced that it will begin the trials of its much-awaited and much-vaunted Bitcoin futures product. The first testing of physically-delivered Bitcoin futures will commence on 22 July.

The latest announcement from Bakkt comes on the back of many delays to date, stretching back to the second half of last year when it first promised to launch by the end of 2018. This latest news will be seen by many as them biding time, as the true delay lies with issues of compliance with regulatory laws. It also appears that there is little new information since its last announcement in May.

The latest announcement makes a subtle reference to a monumental moment, underlining the belief held by many that once these Bitcoin futures are approved, institutional money pouring into Bitcoin would be a giant step for the market. COO Adam White remarked:

“On July 22, two days after Apollo 11’s 50th anniversary, Bakkt will initiate user acceptance testing for its bitcoin futures listed and traded at ICE Futures U.S. and cleared at ICE Clear US… This is no small step. This launch will usher in a new standard for accessing crypto markets. Compared to other markets, institutional participation in crypto remains constrained due to limitations like market infrastructure and regulatory certainty.”

There is likely to be a void to fill as well once Cboe, the first-ever firm to provide Bitcoin futures, shuts down operations after its final contracts settle later in June. Although CME Group is already benefiting from the demise of its competitor, Bakkt will be more attractive since its contracts will be settled with physical Bitcoin instead of cash.

 

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CBOE Futures Closure Unlikely to Impact Bitcoin

bitcoin, CBOE, futures

In about a week’s time, Bitcoin futures at CBOE will cease operations after almost a year and a half. After its last futures contract expires on 16 June 2019, it will close indefinitely.

CBOE spokeswoman Suzanne Cosgrove explained to Bloomberg that there were no plans at all by the company to introduce any new crypto trading products, after confirming its decision to close, announced earlier in March. She said:

“[CBOE] is assessing its approach with respect to how it plans to continue to offer digital asset derivatives for trading, but we have nothing new to announce at this time.”

Although Bitcoin futures markets have had some sway over the price of Bitcoin ever since their introduction —  it is sometimes credited for helping bring on the bull market in 2017 — analysts do not believe that this closure will have any impact on the price movements this time around. This will all be thanks to the success of CBOE’s rival in Bitcoin futures, CME Group.

Just last month, CME Group recorded its highest ever volume for Bitcoin contracts: 33,700 individual contracts worth over USD 1 billion on a single day on 13 May 2019.

Markets analyst Alex Krüger also said that Bitcoin was CME’s second highest traded asset in May and that demand was not diminishing from institutions and accredited investors:

“Bitcoin is the second most heavily traded asset at the CME when measured by the volume / open interest ratio. In other words, bitcoin is an asset very actively traded throughout the day… Volume is the number of contracts traded in a day, while open interest is the number of outstanding contracts held (unsettled) at the end of the day. A high ratio points towards market participants actively trading intraday for whatever reason (hft, arbitrage, etc).”

And with Fidelity and Bakkt also scheduled to come later this year, it doesn’t seem like the bulls will stop their pace.

 

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CME Futures Gap Suggests Bitcoin Near Target of $18,000

CME Futures Gap Suggests Bitcoin Near Target of ,000

Bitcoin trader and self-styled “shitcoin trend trader” Rampage claims that “gaps” in the Bitcoin futures market on the Chicago Mercantile Exchange (CME) suggest that Bitcoin prices could soon rise to meet those gaps at prices of USD 18,000.

With price indicators of the top cryptocurrency by market capitalization heating up in recent weeks, backed by strengthening fundamentals and technicals, more and more segments of the market are convinced that this is the consolidation phase leading to positive momentum in the medium and long term.

$BTC CME gaps yet to be filled;

– $18,500
– $17,700

Look’s like we’re headed back to fill those gaps! pic.twitter.com/DUiCdX23cq

— 𝓡𝓪𝓶𝓹𝓪𝓰𝓮 🦍 (@Thrillmex) May 21, 2019

Rampage is one trader who makes USD 10,000 predictions look conservative, but his point that the gaps in the CME Bitcoin Futures charts that are yet to be filled, offers some legitimacy.

“Filling the gap” as it is referred to in financial markets, is a process in which an asset eventually returns to former price levels where a void has formed in a chart. This typically happens when the asset’s value quickly rises or falls when trading is offline — and this happened to CME futures when Bitcoin prices fell. The resulting gap is usually far away from the asset price, but can act as magnets for price action.

The most recent example for Bitcoin was the flash crash from USD 8,300 to USD 6,300, in which a sudden and extreme sell-off filled the gap left by Bitcoin’s surge from April.

 

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Bitcoin Fights Off Selling Pressure to Climb Above $7,800

Bitcoin Fights Off Selling Pressure to Climb Above ,800

After yesterday’s failure to keep up a push towards an important resistance level at USD 8,000, Bitcoin bulls fought off intense selling pressure to move a few steps ahead from support levels at USD 7,600 to end today in Asian markets at a respectable USD 7,820 (CoinDesk, 6:30am UTC).

The 2% gains over the last 24 hours concealed a fightback from a USD 7,478 low to a USD 7,973 high that happened almost as soon as Japan took over from North American markets, proving once more than the bulls were playing in Asia.

This improvement came on the back of late revelations yesterday from the US Commodity and Futures Trading Commission (US CFTC) that institutional investors had gone all-in on long Bitcoin futures as of 14 May 2019. It was, for many, a huge sign of confidence from Wall Street money that Bitcoin’s outlook for the long term had not looked any less bullish in the past week.

Most analyses in the past 24 hours on social media agrees: that the long term trend is still positive.

The momentum for #bitcoin looks to be slowly tapering off on the daily chart.
All momentum indicators are pointing down but the trend is still to the upside. The next price target for $BTC is $8,000 then $8,600; support: $7670. pic.twitter.com/uPmcECdz8k

— PriceAnalyses.com (@price_analyses) May 24, 2019

Startup founder Erik Voorhees also Tweeted, referencing a Tweet eight years ago in 2011, when a man urged people to invest their life savings into Bitcoin at the then-peak of USD 31. Price later declined to below 10% of the peak to USD 2. Voorhees reminded that we could be in the same phase right now.

This guy looks like genius now, but this tweet was almost exactly the 2011 peak of $31. Price declined for a year down to $2 and stayed there for months. Bitcoin was “dead.” Even those who acted on this tweet would’ve sold soon thereafter, bitter and angry. Hodl is a discipline. https://t.co/EZrhLWl1Ae

— Erik Voorhees (@ErikVoorhees) May 24, 2019

 

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