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How Will Futures for Bitcoin Change the Market

01/09/2019
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Bitcoin is going through a harsh period recently. This autumn has become a season of anti-records breaking. The price of a Bitcoin has dropped below the point of $4,000 for the first time since September 2017. Besides, its market cap has fallen to $67 billion, breaking another anti-record. It has never been lower than $100 billion before.

It looks like all the pieces of news about Bitcoin are opposite to those of the previous year. The Bitcoin traders are anticipating for a sudden change of this unsatisfying situation. And the change is coming: the CEO of Bakkt Kelly Loeffler has announced the launching of the first Bitcoin futures trading market in winter 2018. Bakkt will become a turning point in the development of Bitcoin and is expected to consolidate its price.

Bakkt, Kelly Loeffler, Intercontinental Exchange platform

What Are the BTC Futures Contracts?

Kelly Loeffler has mentioned that Bakkt will reduce the distance between traditional and cryptocurrency assets by employing time-tested infrastructure of the futures market. The Bitcoin futures market will include the requirements of AML and KYC, market analytics, and the standards of accounting. This will help to supply the market with both BTC and fiat currency and to keep the assets safe on the global markets.

Let us have a more in-depth look at bitcoin futures and comprehend its nature. Here are the Bitcoin futures explained in 1 minute:

  • Futures are an agreement between a seller and a buyer to trade an asset on a determined date at a specific price.
  • If both parties enter into a contract, they will have to buy or sell assets at a price they set before, even if the market price has changed significantly.
  • Futures are widely used not only to gain profit but also to hedge the market volatility and protect traders from risks of changing prices.
  • Futures can be long and short-term. Going long or short traders determine the length of a period, at the end of which they will have to buy or sell assets.
  • When it comes to BTC futures, the contracts will be based on the Bitcoin price instead of physical assets.
 Futures, Bitcoin futures, the BTC futures contracts.

How Do Bitcoin Futures Work?

The BTC futures will work by the way the traditional financial assets are traded. For instance, if an investor owns a Bitcoin which costs $10 000 and expects for the drop in price in the near future, he may sell the futures contract at the current price. Thus, he will secure himself from the risks of price dropping and avoid losing profit.

There are three possible ways of development:

  1. The price drops to $8,000. The seller protects his investments from volatility and earns more money than he could;
  2. The price does not change. Both seller and buyer do not gain profit;
  3. The price rises to $12,000. The seller earns less than he could have received, the buyer takes advantage of buying cheaper.
Bitcoin futures, BTC futures trade

The platform will launch physically-settled bitcoin futures. Now the clients will receive bitcoin due to the expiration of their contracts, instead of the token’s cash equivalent.

The experts’ opinions about Bitcoin futures have divided: some of them believe that it is a big step into the next era of digital trading, other consider them controversial to Satoshi Nakamoto's policy of non-interference and non-regulation of a Bitcoin.

However, they all agree that the introduction of Bakkt will lead to regulated exchanges of a BTC. While Bitcoin itself remains unregulated, futures will be available to trade on controlled conditions. This is good news for traders, worrying about high volatile and low-regulated nature of Bitcoin trading market.

What is Bitcoin Futures Date of Launch ?

Recently the Bitcoin futures release date was announced to be on December 12. However, a few days ago Kelly Loeffler delayed the date. She said that the postponing of the date was triggered by the additional work connected with new processes and risk management. She specified that it is a common issue with new products launching. Besides, some new questions emerged, and they require more time to test. What is very important here is a security issue, as crypto futures are a totally new asset class. To make it safe and trustworthy for traders, the timeline was adjusted and the launch was delayed.

Now the BTC futures date trading launch is to be on January 24, 2019. According to the platform developers, this additional month will enable them to receive regulatory approval and eliminate all of the lacks of the system. On the appointed day, the traders will gain access to both trading and warehouse operations.

How Will Bitcoin Futures Trading Influence the Market?

Let us analyze the opinions of the leading financial experts towards futures of bitcoin introduction on the market:

  • Sonny Singh, the chief commercial officer at BitPay, suggests the future price growth of BTC only in case the institutional market participants launch their products based on Blockchain. As an example, he provided the companies Bakkt, Square, and Blackrock. He expects the BTC price to reach $15 000-$20 000 and recommends to ignore its current price, as it is vital to pay attention to what is going on "behind the scenes."
  • Cointelegraph.com informs that the day after Bitcoin futures were announced on CBOE, the BTC price increased by 10%. The experts predict that the price will continue rising and reach the point of $20,000.
  • Gary Gensler, former chairman of the CFTC, predicts a revolution on the BTC market, highlighting that it needs "more regulation than oil." So, the introduction of Bakkt will trigger the growth of demand and price.

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