Bitcoin Derivatives Announcements Helps Boost Currency Value

The digital currency bitcoin shot up in value by $7,000 for the very first time this week after already jumping up sevenfold on the year. In fact, this latest increase seems to be just par for course as the commodity has more than doubled in just the past seven weeks, reaching $7,066.44 on the Luxembourg-based Bitstamp exchange.

This latest rally, though, seems to be driven by news from earlier this week which revealed that CME Group—the world’s largest derivatives exchange operator—has plans to launch bitcoin futures.

Indeed, CME Group Chairman and CEO Terry Duffy comments, “Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,” in a statement.

According to BlockTower Capital CIO and managing partner Ari Paul, “The addition of CFTC-regulated bitcoin derivatives will bring a great deal of liquidity and legitimacy to the cryptocurrency ecosystem.”

Paul also points out that because many institutional investors cannot directly invest in the commodity, a major exchange launching a derivative provides new options for investors to get into the digital currency market.

Duffy also makes sure to add that he is confident CME’s self-certification process through the US Commodity Futures Trading Commission will pass. He contends, “We’ve been working with the regulator. They understand our application. And they understand our model very, very well.”

This makes CME Group just the latest entrant into digital currency derivatives, even as it is still quite volatile and not even listed on any major exchanges. However, CME explains its bitcoin future will be cash-settled and based on CME CF Bitcoin Reference Rate (BRR), which launched just November one year ago in Crypto Facilities, the London-based online trading platform.

As such, Charles Hayter, the CEO of cryptocurrency comparison website Crypto Compare, comments, “This is bitcoin crossing the divide from the wild west of finance to the mainstream.”

He continues, “Futures from an incumbent exchange bring bitcoin and cryptocurrencies into the regulatory fold. This allows more complex financial products to be created and will eventually open the doors to institutional money.”

At the end of the day, this price shift improves bitcoin’s aggregate value—the “market cap” (price multiplied by number of bitcoins that have been released into circulation)—to excess of $117 billion. Furthermore, the aggregate value of all cryptocurrencies has now surpassed $190 billion, according to the industry website Coinmarketcap.

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