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The Future(s) of Bitcoin is looking bright

The Future(s) of Bitcoin is looking bright

The Future(s) of Bitcoin is looking bright

Even though Bitcoin is arguably the most popular cryptocurrency out there, investing in it can be quite risky. A main reason for this is the fact that its currently trading at just over $7,000 making it seemingly unaffordable for those hoping to invest in it. Another core reason is market volatility.

Bitcoin has grown 500% since the beginning of the year, which is remarkable. However, such sharp growth in such a short time may have sceptics wondering when the other shoe will drop.

Just to think, it wasn’t even worth one cent in 2010. Now however, the market capitalization of Bitcoin is in excess of $160 billion. People are also using the currency more, resulting in an increase in transaction values.

The potential, and lucrative, future of Bitcoin has proven to be a lure that some key financial institutions just can’t seem to resist. One of these companies is taking the first steps to transforming this trailblazing virtual currency into a legitimate financial asset in the real world.

CME, the world’s biggest futures exchange, has announced that they will be launching a Bitcoin futures contract by the end of this year. This won’t be a first in the crypto industry as both Ethereum and Monero also have futures contracts. However, CME manages the Chicago Mercantile Exchange and the Chicago Board of Trade and New York Mercantile Exchange and Commodity Exchange, cementing the Bitcoin futures contract firmly into the largest derivative market in the world.

So, how would these futures contracts allow mainstream investors to capitalize on Bitcoin? Well, both counterparty risk and market volatility risk will be greatly decreased and even eliminated when investing with futures contracts. The way it works is that an investor will bet on the future price of the commodity or currency, Bitcoin in this case, set for a future date. When the date arrives and the market value of said commodity is actually higher, the investor will pocket the difference.

The investor does not even need to purchase an actual Bitcoin, they just need to essentially speculate on the price of it. Being a holder of actual Bitcoins will put that user or holder at the mercy of the markets, which is unpredictable when it comes to cryptocurrencies. In addition, the creation of these futures contracts will enable the creation of Bitcoin ETFs, which will most likely be backed by these contracts.

An undeniable risk is that the ease of investing could actually drive up the price of the currency. However, it will also create a market to launch more products and technology to easily incorporate crypto into our everyday lives.

 

Author : Jack Dean

Jack has worked in the cryptocurrency industry for 5 years now as a reporter. His experience is predominately in banking, while he also has a keen interest in the forex world. His daily output is read by thousands of readers globally.

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