Futures contracts by the Intercontinental Exchange Inc. debuted on Monday. It marks a new chapter in bitcoin’s history. The result of the first federal regulation in trading bitcoin could convince conservative investors who had chosen to remain in the sidelines. It also could encourage efforts to create a market structure for professionals.
James Putra, head of product strategy at Trade Station Crypto calls the move to centralize and scale the infrastructure a ‘positive step’. The fact that ICE contract deliver actual bitcoin, investors can profit from the rise in the futures price before taking possession of the coin.
The flagship currency has risen a record 177% this year alone, a statistic better than any asset worldwide. In December 2017, a cash settled futures commencement sent bitcoin up 9% besides coinciding with the crypto-boom to a record $19,500.
Pending Regulatory Approvals
It wasn’t a smooth sail for the ICE contract. The ship was set to sail earlier than planned but due to opposition from the commodities futures trading commissions, month long delays ensued. The commission questioned how the company was proposing to store client’s token and safeguard them from manipulation and theft.
The solution was to seek licensing from the New York financial regulators to permit the platform to hold custody of customer tokens. The same unit began operations earlier in the month to familiarize clients with how it works.
Chief Operating Officer at Bakkt said that, what sets apart the institution is the fact that the institution provides for a regulated trading and custody of bitcoin. White also clarified that the contract is designed for institutional participants.
How It Works
Aside from a daily contract, the company also offers a 30 day future contract. The daily contract will be made available for investors to trade 70 days into the future while the monthly one will be lusted 12 months out. Both contracts can be rolled upon their expiration.
As for the delays before the launch White calls it time well spent as the company needed to address the customer concerns on bitcoin storage. White also insisted that they had to get the product right. He also asserted that it was rare for a futures industry to deal as an exchange, a clearing house and as a custodian for delivery at the same time.
When the platform was finally approved by the regulatory body, a layer of intimacy was added to the market. The custody of bitcoin itself can be a particularly risky business. If private keys would be stolen, then the thief would have access and control the bitcoin.
For now, the main competitor for ICE bitcoin futures is CME group contracts. Earlier in the month, CME group said it would boost the number of contracts users can hold. They also admitted that they were considering options into bitcoin future contracts that they would launch in Q1 of 2020.