CME Bitcoin Futures - How did the Markets React?

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The Chicago Mercantile Exchange (CME) started to offer Bitcoin Futures some hours ago. The market opened at 5:00 PM Central Chicago Time, one hour before than the Chicago Board Options Exchange (CBOE). The cryptocurrency market was a little bit volatile before and after the opening hours.

How Does the CME Work?

Bitcoin Futures allow two parties to trade an asset (in this case Bitcoin) at an arranged price in a future date. These Bitcoin Futures are cash settled, that means that in the exchange there will not be any Bitcoin involved.

Each contract offered is composed by five bitcoins and not one like the CBOE. The futures will be traded on the CME Globex and CME Clear Port from 5 PM to 4 PM. While trading, the futures will have a price limit that is fixed at 20% above or below the prior settlement price. The CMF CF Bitcoin Reference Rate (“BRR”) will be a daily rate of the U.S. Dollar price of one bitcoin as of 4 PM London time.

How did the CBOE and CME Affect the Cryptocurrency Market?

When the CBOE started to offer Bitcoin Futures, the market reacted positively. The first 20 hours Bitcoin price increased almost 20 percent. One week after it, bitcoin tested the 20K price level.

Now, that the CME opened, the market reacted in a different way. In less than an hour bitcoin lost $1,000 dollars from $19,000 to $18,000 in the Bitfinex exchange. It recovered and tested again $19K but couldn’t make it to keep growing. At the moment of writing this article, Bitcoin is being traded around $18,400 dollars.

What can We Expect from Them?

Bitcoin Futures allow different important institutions and big investors to gain access to the cryptocurrency market. The world of the cryptocurrencies was not first adopted by financial institutions and banks. It usually happened in this way, with different markets and industries. But the cryptocurrency market was firstly adopted by developers and technological experts.

This situation has created several millionaires during the years. Banks and institutions do not have a mainstream channel in order to invest on that market. These Bitcoin futures allow them to gain a traditional place in a relatively new market.

Bitcoin and other cryptocurrencies will reduce their volatility. They will gain volume and an important flow of money. Furthermore, that means more legitimacy for the cryptocurrency market. In the long term, the market is expected to keep growing, and some experts believe that the currency will end the year close to $24K.