Bitcoin futures are coming thanks to CME Group (CME) and Cboe Global Markets, with a handful of online brokerages including Ally Invest and TradeStation ready to offer the futures to their clients on day one. While cryptocurrency is confusing, volatile and unregulated – raising the ire of all sorts of regulators around the globe – it is also hugely popular with investors.
For Rich Hagen, president of Ally Financial Inc.'s (ALLY) online brokerage Ally Invest, Bitcoin futures offered by CME may be the ideal investment vehicle for investors who are curious about cryptocurrency but aren't so sure how to play the market. "What's interesting about Bitcoin futures is that you'll have the ability to take both sides of Bitcoin – it's a two-sided market, you can go long or you can go short," Hagen said in an interview with Bank Innovation. He said that offering CME's Bitcoin futures on Dec. 18 when they become available is all about giving investors choice.
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Late last week, the CME and Cboe Global Markets got the green light from the Commodity Futures Trading Commission to list their futures. The futures are set to launch on Dec. 18. The CBOE said it will have a timing announcement on its product soon. Both companies have acknowledged that they have to create a way to handle the swings in Bitcoin's value. CME, for instance, will require an initial margin of 35% from investors to back the trades.
As Ally Invest and TradeStation plow ahead with offering the Bitcoin futures, Fidelity Investments isn't following suit, and Charles Schwab told Investopedia that it is taking a wait-and-see approach. "We are monitoring this new market and evaluating our clients' interest levels and familiarity with cryptocurrencies, along with their dynamics and risks," said Schwab spokeswoman Kaitlyn Downing. "We intend to study the new proposed bitcoin futures contracts and weigh their associated risks with an eye to protecting our clients' interests before we make these products available."
Many investment firms are concerned about the volatility associated with cryptocurrency and the risks that come with investing in something that is unregulated. Bitcoin started the year trading around $1,000 and recently surpassed $11,000, underscoring its extreme volatility. Hagen said in the interview that, because the futures let you bet on its rise and its decline, it could decrease volatility.