Bitcoin, the most well known cryptocurrency on the market, continues to skyrocket. Bitcoin is up over 900% this year and is currently trading at over $6,500 after making new all time highs the week before.
And it’s poised to go much higher.
(image courtesy of Coinbase.com)
While Bitcoin has been an extremely attractive target for individual traders, it’s been more or less ignored by Wall Street and the government as far as regulations go. That’s not to say that no one in those circles has heard of Bitcoin, but it is to say that Bitcoin just isn’t that important to them — yet. Bitcoin’s market value is around $125 billion. And while that’s a vast amount of money, it’s trivial compared to the New York Stock Exchange’s total value; $18.5 trillion.
That’s about to change.
Last week, CME Group Inc., the owner of the world’s largest exchange, announced plans for Bitcoin futures by the end of 2017, barring regulatory interference. This announcement came just one month after CME dismissed the importance of Bitcoin.
Following that announcement, Bitcoin surged even higher, up more than 700% in 2017.
The announcement of a Bitcoin futures product sets the stage for a Bitcoin ETF in the near future, allowing traders who either can’t trade Bitcoin due to regulatory hurdles or won’t trade cryptocurrencies because of fear or other self-imposed obstacles. With Bitcoin futures, traders can simply bet on the gain or decline of Bitcoin, without actually investing in Bitcoin directly. Once the futures product is established, a Bitcoin ETF can be expected by the end of 2018.
But launching an ETF is more difficult than launching a futures.
Both ProShares and VanEck, two major investment firms, submitted applications for Bitcoin ETFs. However, those applications are now on hold, since the Bitcoin futures they want to track don’t yet exist.
Once a futures product exists for cryptocurrency, applications for a Bitcoin ETF can then be submitted once a product to track exists. Futures exchanges need approval for the contracts from the U.S. Commodity Futures Trading Commission, but ETFs would also need U.S. Securities and Exchange Commission approval.
In March, the co-creators of the Gemini exchange Tyler and Cameron Winklevoss, were the first group to submit an application for a Bitcoin ETF. That application was rejected by The SEC, citing necessary surveillance-sharing agreements were too difficult given that “significant markets for bitcoin are unregulated,” according to the agency.
Currently, traders can exchange Bitcoin on LedgerX, which won approval from the Commodity Futures Trading Commission just within the last month. Volatility has been light so far, but that’s expected to change with the increased Bitcoin activity in the financial arena.
Once Bitcoin futures are official, the next step is Bitcoin ETFs. As Wall Street embraces cryptocurrency, traders should be standing by to do the same.
If you’d like to learn more about ETFs, click here to register for John Carter’s free live ETF training