Why Bitcoin ETFs Are Closer To Reality

August 16, 2017

Bitcoin may be the hottest financial asset of 2017, but many investors have had a surprisingly hard time getting a hold of it. For those unable or unwilling to jump into the unfamiliar world of bitcoin wallets and unregulated bitcoin exchanges, there's been few good ways to get exposure to the surging digital currency.

That could soon change. A number of new financial products tied to bitcoin could begin trading on regulated exchanges as early as this year, opening the door for investors of all stripes to get in on the cryptocurrency craze―perhaps even providing an opening for the first bitcoin ETF.

Bitcoin Options And Futures

The first of these new bitcoin products was revealed last month, after the U.S. Commodity Futures Trading Commission (CFTC) granted LedgerX authorization to provide clearing services for fully collateralized digital currency swaps.

With CFTC approval in hand, LedgerX announced it would be offering options on bitcoin to institutional investors this fall, making it the first federally regulated bitcoin options exchange.

Not to be outdone, a week later, the Chicago Board Options Exchange (CBOE) reported it was planning to launch cash-settled bitcoin futures in the coming months. The futures―which are pending regulatory review by the CFTC―could begin trading in Q4 of this year or early 2018, according to the CBOE, and would be supported by market data from the Gemini digital asset exchange.

If they come to fruition, these options and futures on bitcoin would be revolutionary, potentially enabling billions of dollars of institutional money to come into the digital currency space.

“A U.S. federally regulated venue for derivative contracts settling in digital currencies opens the market to a much larger customer base,” said Paul Chou, CEO of LedgerX. “We are seeing strong demand from institutions that previously could not participate in the bitcoin market due to compliance restrictions against unregulated venues.”

And it might not stop with bitcoin. LedgerX anticipates launching options on ethereum―a rival cryptocurrency―in the near future, while CBOE will explore adding futures on other digital currencies, "on a case by case basis," according to Hannah Randall, director of communications for Bats Global Markets, a CBOE company, which is also the parent company of ETF.com.

 

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