Nasdaq Plans to Introduce Bitcoin Futures
In November 2017, the word slipped that Nasdaq, currently the second largest stock exchange, will be offering bitcoin futures beginning as early asquarter two 2018. This move makes them the third American market to do so after the CME Group and CBOE, and further draws bitcoin and cryptocurrenciesinto the mainstream market. However, what does this mean for the average investor, or those hoping to get into bitcoins now? With major US analysists and bankers continuing to deride bitcoin and cryptocurrency, why would stock brokerages risk legitimising them?
What Futures Are
Futures are contracts that obligate users of an exchange to buy an asset at a pre-determined price in the future. As such, Futures manage the potential movement of prices of assets. If the market anticipates the increase ofprice for an asset, investors have the potential to gain if they purchase them as futures, then selling the asset later. However, if the asset’s price drops lower than the speculated price, buyers could lose. Of course, If an assets price is projected to fall, investors may sell it as a futures contract only to buy it later at a lower rate.
How Futures Affect Bitcoin
Bitcoin is an incredibly volatile asset. Though it is currently at a record high, bitcoin’s value can both rise and fall thousands of dollars in the period of a day. Futures are projected to make bitcoin far more stable and lower the risk to investors by preventing losses from unfavourablechanges and maintaining a predetermined result. Futures can make bitcoin more appealing to the average investor, as well as further legitimise the currently unregulated currency to payment providers, who recognise its not going away but are hesitant to accept it as a currency for items.
Who Uses Bitcoin
Bitcoin is used by people from all walks of life. Currently traded almost exclusively on cryptocurrency exchanges, bitcoin is traded, mined, and held as a high-risk investment by many high-risk investors. End users also use bitcoin to buy items, services, and even real-estate. The London Block Exchange is launching a debit Visa card allowing the use of cryptocurrency at any retailer across the UK, and Square Cash, a popular payment and cash sending app, is rolling out support for bitcoin support to its users. Though many institutions disagree on the prospects and prices for bitcoin, they all agree that it’s here to stay.
Bitcoin isn’t going anywhere, and Nasdaq’s formal recognition of it as an asset should offer stability to its incredibly volatile value, as well as make it more accessible by the average investor. Bitcoin futures should make bitcoin more appealing to businesses as a payment method for end users, and may spark the government to develop a regulatory scheme to deal with cryptocurrencies such as bitcoin. Furthermore, once on Nasdaq, Bitcoin ETFs are projected to be a big hit, quickly gaining capital and support. However, Nasdaq inclusion may also lead to an end of bitcoins decentralisedschema and a massive price drop as it is snatched up by a few investors, with massive buying power.