At the end of December 2017, the very first bitcoin futures contracts were launched after the leading cryptocurrency had experienced a year of massive growth. Since then various other exchanges have started to offer bitcoin futures, while CFD bitcoin trading has become another popular option for traders.
There has been a lot of speculation regarding a potential bitcoin crash and controversy around the cryptocurrency. Futures and CFD trading offers a somewhat less risky trading option and the introduction of these has had a wider impact on the financial market.
The Rise of Bitcoin
Back in 2008 the idea behind bitcoin was first laid out in a white paper, before its initial price was set at less than $0.01 back in 2010. From there it grew and grew, to the point when it reached an all-time high of $19,783 on December 17, 2017. More investors poured money into the cryptocurrency as it was surrounded by a lot of hype and it was around a similar time that bitcoin futures trading was introduced.
Futures Trading Popularity
When the first bitcoin future debuted on a major US exchange it immediately jumped, surging by more than $3,000 in just eight hours of trading. These don’t involve buying any actual bitcoins, simply tracking the price and agreeing on a price in the future.
However, after a positive start, the popularity of bitcoin futures waned somewhat from the start of 2018. Still, the likes of CFD trading on bitcoin have remained more popular, as it allows traders to better manage their risk. Without owning the virtual currency directly, it means that if there is a large drop in value, their finances won’t be as badly affected.
The introduction of bitcoin futures trading has coincided with something of a crash for bitcoin. From ending 2017 by reaching peaks closing in on $20,000, it fell dramatically, recovered a little bit and dropped once more to hover around the $7,000 mark in early April 2018. While this is still an impressive value compared to a year or two ago, such a fall could signify that the bubble has burst.
It could be easy to claim that the introduction of bitcoin futures has had a negative impact and is partly responsible, but this isn’t wholly true. A crackdown on regulation on the cryptocurrency market and the banning of trading and platforms in some countries are more to blame for its crash. The cryptocurrency has always been volatile though, so many bitcoin enthusiasts believe this period is just part of the process.
In early April 2018 though, bitcoin did crash on the futures exchange and fell below $5,000, with allegations of market manipulation in a fevered sell-off. Trades were subsequently reversed though.
Has it Helped Legitimise Bitcoin?
One positive for bitcoin that has come from the introduction of futures trading is that it has helped to further legitimise the cryptocurrency. It has helped to solidify its reputation as a genuine investment/trading asset and not just a fad. So much so that the New York Stock Exchange’s parent company, Intercontinental Exchange Inc., could soon get involved with the cryptocurrency. It has taken note of the trend and if bitcoin futures trading grows in popularity it may make a move.
The jury is still out in some circles regarding bitcoin but the introduction of futures trading for the cryptocurrency could help it grow further.