BITCOIN FUTURES: YOUR NEXT INVESTMENT VENTURE
With the whole world now blabbering about the present cryptocurrency revolution, you ought to get informed about even the slightest movement in the market as you might be the next billionaire. Who knows?
Recently, the market has been graced with yet another cryptocurrency reform. And it is none other than the bitcoin futures.
What is Bitcoin Futures?
Have you heard of futures? It’s an agreement whereby traders agree to purchase/sell assets in some future specified date at a specified price. The main purpose of these sorts of transactions is to manage the risks. On the expiry of the agreed term, irrespective of the market price of the asset, the asset is traded at the price specified in the agreement.
Bitcoin Futures is pretty much the same with futures. Speculators enter into the Bitcoin Futures contract on the basis of their anticipation of the future price of Bitcoin.
Let’s make it clear with an example:
Mr. A holds 1 bitcoin which is for example worth $19000. He expects the price of bitcoin to fall. So, to manage risks he enters into a Bitcoin Futures contract with Mr. B whereby he makes an agreement to sell his bitcoin at some specified future date at the current price. As the expiry date of the agreement comes nearer, the price of the bitcoin would have dropped thereby decreasing the price of the contract. Then, he buys back the same contract at lower price, say $15000 which he had sold for $19000. To sum up, he managed to cover up the potential loss of $4000.”
So, this is pretty much how the Bitcoin Futures work. Nice and easy, isn’t it?
Why is Bitcoin Futures so appealing?
The price of the bitcoin has continued its momentum with prices over $19,000 last week. Through the launch of Bitcoin Futures by CBOE and CME around one week ago, USA’s Bitcoin Futures exchanges have made bitcoin’s price to go up even higher. Below are some reasons for this.
- More institutional investors, who were previously skeptical about it due to its lack of regulation, are turning their bets towards bitcoin trading.
- It has opened up the market for the investors even in the countries where bitcoin is illegal as they can be traded on public exchanges.
Though the future seems promising, people are still skeptical about it as the price is highly volatile. Also, some term it as the ‘bubble’ while others still consider it fraud. But, at the end of the day, it’s for you to decide.
What to expect from Bitcoin Futures?
The price of bitcoin rose by more than $1,500 or 10% within 24 when CBOE introduced Bitcoin Futures contract on December 10, 2017.
Truly, there are plenty of points to remain optimistic though the price still remains highly volatile. Authorities remain optimistic about the influx of huge amount of capital in the bitcoin market as the introduction of Bitcoin Futures has done pretty well during its initial phase. Here is a curve for the estimated price of bitcoin. Happy investing!