Bitcoin ETFs Are Back After Futures Launch

Bitcoin — the hottest trade of 2017 — is now easily available to individuals and businesses courtesy of the launch of the first futures contract on Chicago Board Options Exchange (CBOE – Free Report) in the evening of December 10.

Bitcoin futures, expiring in January, spiked more than 20% to a record high of $18,000 in just four hours of its debut and triggered a so-called circuit breaker two times. Under CBOE rules, the circuit breaker has been designed to reduce price volatility wherein 10% movement in prices triggers a two-minute trading halt while a 20% move triggers a five-minute halt.

On the first full day of trading, bitcoin futures was up 19% at the close of $18,545. The digital currency itself rose more than 14% to $17,261, according to CoinDesk’s bitcoin price index.

This is the first time that investors are getting exposure to the bitcoin market via a large, regulated exchange, leading to increased investment in the booming cryptocurrency with a growing number of retail investors. It provides investors a way to buy and trade in the digital currency, which is otherwise not readily available.

A Push to ETFs

This has led to renewed interest to create ETFs tied to the cryptocurrency. This is especially true as two issuers refiled their applications for futures-based bitcoin ETFs with the Securities and Exchange Commission (SEC). REX refiled for two ETFs, namely REX Bitcoin Strategy ETF and REX Short Bitcoin Strategy ETF while VanEck refiled for the VanEck Vectors Bitcoin Strategy ETF. These applications were previously withdrawn by issuers following the rejection by the SEC or lack of regulation of the bitcoin spot market and unavailability of bitcoin futures contracts.

The CBOE is not the only exchange listing futures contracts. The Chicago Mercantile Exchange (CME – Free Report) will begin initial listings of bitcoin futures contracts on Dec 18 while Nasdaq plans to launch bitcoin futures as early as in the second quarter of 2018. CME’s contracts will also be cash-settled and are based on an index from four bitcoin exchanges — Bitstamp, GDAX, itBit and Kraken. The contracts will be available on the CME Globex electronic trading platform, and for submission for clearing via CME ClearPort, effective Dec 17 for a trade date of Dec 18.