The Future of Digital Currency Trading
The ability to trade digital currency is constantly changing as the industry’s rapid growth is creating new opportunities for investors. The CME Group has emerged as the new pioneer of cryptocurrency trading, announcing a plan to introduce bitcoin futures trading to their large pool of institutional investors.
The CME Group is also known as the world’s largest futures exchange and certainly has the power and ability to execute this plan. Due to bitcoin’s ability to increase or decrease several hundred dollars a day, the CME Group is developing methods to to reduce the volatility of the coin. By reducing volatility of the currency, CME is hoping the bitcoin futures will be more appealing to institutional investors.
One way the CME plans on reducing the volatility of bitcoin is by setting price fluctuation limits on their platform. These limits will be set at 13% above and 7% below the settlement price of the digital currency. These fluctuation limits are similar to those of the U.S. stock index futures, however, thanks to the volatility of bitcoin these limitations will be much more relevant.
As CME is leading the charge to introduce bitcoin futures, many companies are following suit. Cboe Options will be offering bitcoin trading for institutional investors in early 2018, a little behind CME, which plans to offer the futures in December.
A question to think about, with volatility reduced will bitcoin futures be more or less appealing to investors? Isn’t it the high return opportunities that make the currency so attractive? If investors wanted to play a safer game, maybe they should just leave the table.