Bitcoin's Mainstream Moment? CME Group Announces Bitcoin Futures

11/01/2017 - 10:45 UTC
Bitcoin's Mainstream Moment? CME Group Announces Bitcoin Futures

CME Group, the American financial market company operating the world's largest options and futures exchange of the world, announced it  will launch Bitcoin futures, based on the CME CF Bitcoin Reference Rate (BRR), in Q4 2017.

The Chicago-based corporation, which among others owns the Dow Jones stock and financial indexes, announced on October 31 the intention to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods.

Following on a record-breaking month for bitcoin's price, the announcement by CME Group might be the mainstream moment bitcoin supporters waited for.

According to CME Group, the new contract "will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin"

Bitcoin futures will be listed on and subject to the rules of CME.

Terry Duffy, CME Group Chairman and Chief Executive Officer, said:

"Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,"

The CME Group CEO continued: "As the world's largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities."

What Is The BRR?

The Bitcoin Reference Rate aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. It is designed around the IOSCO Principles for Financial Benchmarks.

Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.

CME Group and Crypto Facilities Ltd. have calculated and published BRR since November 2016.

"We are excited to work with CME Group on this product and see the BRR used as the settlement mechanism of this important product," said Dr.Timo Schlaefer, CEO of Crypto Facilities. "The BRR has proven to reliably and transparently reflect global bitcoin-dollar trading and has become the price reference of choice for financial institutions, trading firms and data providers worldwide."

What Is The Bitcoin Real Time Index?

CME Group and Crypto Facilities Ltd. also publish the CME CF Bitcoin Real Time Index (BRTI) to provide price transparency to the spot bitcoin market.  The BRTI combines global demand to buy and sell bitcoin into a consolidated order book and reflects the fair, instantaneous U.S. dollar price of bitcoin in a spot price.

The BRTI is published in real time and is suitable for marking portfolios, executing intra-day bitcoin transactions and risk management.

Bitcoin On The Rise

Cryptocurrency market capitalization has grown in recent years to $172 billion, with bitcoin representing more than 54% of that total, or $94 billion. At the moment of writing, the price of one bitcoin hovers north of 6,500 dollars, approximately nine years after its birthday when Satoshi Nakamoto published his famous Bitcoin white paper.

The bitcoin spot market has also grown to trade roughly $1.5 billion in notional value each day.

The introduction of Bitcoin futures by world's largest financial market company might be the catalyst which will catapult the cryptocurrency to become officially mainstream and embraced by "big money", eradicating fears of a bubble.

Who Is CME Group?

CME Group is the world's leading and most diverse derivatives marketplace,  where the world goes to manage risk. 

The corporation owns and operates large derivatives and futures exchanges in Chicago, New York City, and exchange facilities in London, using online trading platforms such as the CME Globex platform. It also owns the Dow Jones stock and financial indexes, and CME Clearing Services, which offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives.

Through its exchanges, CME Group offers the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange,energy, agricultural products and metals. 

It has been described by The Economist as "The biggest financial exchange you have never heard of".

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice on Bitcoin, Cryptocurrencies or finance in general.