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After the windfall Bitcoin has seen lately, it's earned the right to become a new asset class on its own, meaning it will be in the same ilk as gold or stocks which can be traded for major investors and most of all regulated and not only as a crypto-currency.
This is according to CME (Chicago Mercantile Exchange), the world’s largest derivatives exchange, who announced last week that they plan on launching a futures contract of bitcoin, this is a significant move for the digital currency and another step towards acceptance in the mainstream.
“That’s a very important step for bitcoin’s history... We will regulate, make bitcoin not wild, nor wilder. We’ll tame it into a regular type instrument of trade with rules,” Leo Melamed, Chairman Emeritus of CME Group told Reuters in an interview.
In the past Bitcoin had limited use in the wider economy, mostly due to its volatility. The value of the currency might go up or down significantly between the time a deal is struck and delivery.
The futures setup will allow investors to short-sell bitcoins, making two-way bets possible and manage the risk a lot more, making it safer to hold and trade in Bitcoin.
“Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price,” explains Investopedia.
Futures contracts already exist for blockchain technologies like Ethereum.
Like many leaders in the financial realm, Melamed was initially skeptical about bitcoin, though he has begun comparing his past successful ventures to the currency. Especially the International Monetary Market currency futures trading, something he launched as chairman of the Chicago exchange in 1972.
He claimed that Bitcoin could go further than being just a crypto-currency and represent a new asset class based on blockchain technology.
“My whole life is built around new technology. I never said no to technology. People who say no to technology are soon dead. I’m still that same guy who believes in, at least examining change. That’s what bitcoin represents,” he also said to Reuters.
With an increased flow of investments going into Bitcoin, it's likely that the affect will push prices up and make the currency more attractive to private citizens and corporations.
Bitcoin Right Now
So far Bitcoin has hit a cap well over $160 billion, a figure larger than the GDP of most small countries. As it grows, so do transaction volumes, indicating an increase in the use of the cryptocurrency.
However, according to CoinDesk, it is still falling short of the $8000 mark, and they believe the cause may be investors are backing off from going further.
“To start with, comments on social media indicate investors are seeing the likelihood of a short-term pullback, and the resulting caution may have weakened the bid tone,” said CoinDesk.
Right now bitcoin is at $7,395 levels, but with the CME news, there might be another uproar coming.