CME Group Launching Bitcoin Futures

I'm really excited to see the CME go live with Bitcoin Futures in the next few weeks. Many institutional investors aren't able to buy Bitcoin for two reasons: custodianship and "headline risk". At the moment, if you want to buy Bitcoin, you either custody the Bitcoin yourself using a hardware or paper wallet or you keep it in an exchange. Both have their downsides especially if you are managing third-party money like most institutional investors.

If you are using self-custody, you need to ensure your private keys/recovery seed are secured in safes, banks or other private places. This makes it difficult to trade though because if they are held off-site, you will need to go get your private keys, make the trades, and then take your private keys offsite again once the trades are finished.

CME Group Launching Bitcoin Futures

Exchanges have their own set of risks. When your money is on an exchange, you don't control your private keys and thus ultimately don't control your Bitcoin. The upsides of holding on an exchange are that it's much easier than cold storage, but this is lazy because you risk losing all your money. Exchanges can fail (Cryptocurrency is still the wild-west with little regulations) or your account can be hacked.

This is where the CME comes in. The CME has existed since 1898. It's much easier for institutional investors to trust the CME and trust a product like futures which they understand. This allows them to buy Bitcoin safely because it solves the custodianship issue (CME handles custody) and "headline risk" (they are buying from CME, a "storied institution")

There are also two other future products launching: CBOE and LedgerX. LedgerX had a soft launch in October and over $1MM in USD volume. We expect this to open the floodgates for institutions to buying Bitcoin as they'll finally have a method of buying in a way they understand. It could take a few months, but we expect both the price of Bitcoin and other cryptocurrencies to benefit from this.

Learn about investing in Bitcoin with a Beginner's Guide to Investing in Cryptocurrency

~ Ari Lewis | Follow Ari on Twitter @amlewis4

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