XBT Cboe Bitcoin Futures

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Chicago Board Options Exchange CBOE To Launch Bitcoin Futures Trading

Over the last few weeks, many bitcoin enthusiasts have welcomed the news of possible bitcoin futures markets. Recently the Chicago Board Options (CBOE) launched its bitcoin derivative contract specifics, giving hope for all investors who are interested in the new trading vehicle.

Being the US largest options exchange, CBOE said that its plan to launch the bitcoin futures products will happen in the fourth quarter. This move follows a number of other financial institutions which have also hinted about introducing Bitcoin futures as well.

CBOE to Use XBT Ticker for the New Products

According to the Chicago Board Options Exchange, its products will use the XBT ticker, a similar one being used by Kraken – another bitcoin exchange. There are also expectations that the company will also introduce other types of contracts in a bid to get a bigger share of the market quickly.

“The contract multiplier will be 1 so if a contract is trading at parity with bitcoin it will be worth about $7,900 based on current pricing — The minimum tick for a directional, non-spread trade is 10 points or $10, and a spread trade will have a much smaller tick of 0.01 bitcoin or $0.01,” says Russell Rhoads – the CFA of Cboe.

CBOE swaps more than $2 billion in its contract trade volumes annually, offering a good number of derivative products for about 2,200 companies, 22 stock indices and 140 ETFs.

Increasing Demand for Financial Products that are Based on Bitcoin

There’s a notable increase in the demand of financial products that are bitcoin-based because of the surge of value of several cryptocurrencies, with some financial institutions taking a turnaround on their bitcoin assessment. Goldman Sachs, for instance, advises its investors to adopt bitcoin and not ignore it anymore, after previously criticizing the digital currency.

This increasing demand for bitcoin derivatives and futures is seen to result in high competition among all industry players. The competition is expected to be tough, especially with the entry of CBOE, considering that the firm is the biggest exchange of its kind in the United States.

To compete effectively, however, there are some issues that CBOE needs to resolve, among them being how to relate the contracts it offers to spot the pricing of bitcoin.

VanEck SolidX Bitcoin Trust ETF (XBTC) Exchange Traded-Fund (ETF) Proposal Plans Filed

XBTC What is this All About the New Bitcoin ETF Proposal?

There have been an important amount of bitcoin ETF proposal in the last months, but all of them have been denied by the Securities and Exchange Commision (SEC) or withdrawn by companies. This time, VanEck and SolidX are partnering in order to offer a new proposal.

The VanEck SolidX Bitcoin Trust ETF aims to solve all the major concerns that the SEC has regarding these funds. For example, the new ETF would be carrying bitcoin theft insurance in order to protect shareholders from exchange hacks or other fraudulent activity.

Additionally, the $200,000 share price will make the fund available only to wealthy and institutional investors, thus, avoiding general population to have access to it. The proposal clearly addresses the concerns from the SEC, but it is not clear whether it will be enough or not for the regulators working at the SEC.

Indeed, at the beginning of this year, there were more than a dozen bitcoin ETF filings made with the SEC. There are several companies that have been working with ETFs in business that use futures, so it seemed very likely that the SEC would give approval on these ETFs based on Bitcoin futures.

The SEC explained that it was not ready, and it raised concerns about how these Bitcoin futures would be accurately priced. Moreover, they said that there was a potential lack of liquidity meaning that it could severely harm investors. At the moment, there are no indications that show that the SEC has changed opinion.

Back in August 2017, VanEck decided to present the first bitcoin ETF using futures, but the SEC did not approve it. SOlidX, an important fintech company that is working in the bitcoin ecosystem, decided to make an attempt with a physically-backed bitcoin ETF, but in the same way, the SEC did not like that.

Now, these two firms are working together in order to address the major concerns that the SEC has related to Bitcoin ETFs.

The SEC explained that it is not comfortable with the investment environment around Bitcoin. For example, it was very concerned when Bitcoin approached to $20,000 dollars and then it started to fall.

The SEC was also worried about the same thing related to Blockchain ETFs and asked the companies to remove the word ‘blockchain’ from their names.

CBOE Global Markets Files New Bitcoin ETF License Application With SEC

The United States has received another application from CBOE Global Markets. Other applications have unfortunately not been approved, but a Bitcoin ETF appears to have a better change of success. Many of these rejections have occurred as a result of an unregulated market, but the SEC has recently made clarifications. These changes show that Bitcoin and Ethereum are not considered securities, which hopefully has given enough understanding to help Bitcoin bring more value and institutional money into the industry.

CBOE Global Markets is just one of the most recent companies to put up an application for an ETF licenses. The SEC requested comments on the application on June 26th. The proposal only will trade with SolidX Bitcoin Shares, and each share will be worth 25 Bitcoin. Even with approval, consumers cannot expect to see trading options available until the first quarter of 2019.

VenEck SolidX Bitcoin Trust previously put in two applications for this matter, but they were rejected under the violation that the crypto market was entirely unregulated. This rejection occurred in March 2017, though the SEC released the following statement at the time:

“Based on the record before it, the Commission believes that the significant markets for Bitcoin are unregulated. Therefore … the Commission does not find the proposed rule change to be consistent with the Exchange Act.”

Even though there is still a lot of debate over how the crypto market is regulated, the SEC has clearly decided that the Bitcoin and Ethereum tokens are not considered securities. After this decision was established, it became easier on the market and local regulators to define the coins. Unfortunately, beyond the definition, the SEC still sees these tokens as securities at the origination of them.

Since the SEC has decided that they will not be regulating Bitcoin, there is no worry about unregistered securities. However, the U.S. is way behind other countries that are making great strides in their regulatory measures. Malta recently spoke about the three new laws that they setup on July 5th to help the crypto market to thrive there. In that announcement, it was revealed that Europe’s largest ETF trader plans to make the move to the crypto industry. With these big moves, the SEC should focus more strongly to help the U.S. be more competitive in the industry to keep up.

Cboe Global Markets See Lowest Levels Ever On Bitcoin (BTC) (XBT) Futures

The volatility of Bitcoin is reaching its lowest levels so, naturally, the same is happening for Bitcoin futures contracts. At the moment, futures have reached their lowest level ever, which shows the stability of the crypto market now that is more stable than the current traditional asset marketplace is with the trade war between China and the United States.

According to Kevin Davitt from CBOE Global Markets, XBT (Bitcoin) futures are moving at a very little speed and this week they had the least volatility since they were launched. The average weekly volatility in October was only 6.6%, down from the 28.23% of when the futures were launched back in December 2017.

In fact, there is a clear trend that shows that the volatility has been down. While at first, it was considerably higher, now it is slowly getting flattered. The trend is very similar to the main Bitcoin market that did not leave the 6,000 range mark for a long time now.

Some people believe that this shows some fatigue from the retail investors while other people seem to believe that the effect is caused by the lack of speculation in the market, which is slowly getting more and more stability.

Some people, like Mati Greenspan, an analyst from eToro, defends the idea that the flat price of Bitcoin is a testament that the market has increased its liquidity and maturity, which would prove that price discovery “works for all assets”.

In the market at large, the movement is very mixed. Some cryptos are going up like Ripple’s XRP, while Ethereum is flat like Bitcoin and some tokens are losing value.

Cryptos More Stable Than Equities

It is an interesting move that cryptos seem to be reaching a whole new level of stability right when the equity market is so wild as the volatility is increasing in the global markets.

The main difference is that the traditional market is more shaken by the news of the trade wars that the U.S. president Donald Trump is promoting now while after the severe bear market, cryptos seems to finally be getting some stability. The uncertain rise of interest rates also affects the traditional markets.

Obviously, the trade war will not last forever and neither does the post-bubble crash bear market of cryptos, so there is plenty of space for things changing with time.

Analyzing CBOE Bitcoin Futures Data, Does This Mean BTC Prices Will Drop More? Not Likely!

Bitcoin is currently trading around $3,650 and not seeing much price development. For now, it looks like, Bitcoin price is maintaining stability.

However, if we take a look at the Bitcoin futures, we might get some other ideas. The Bitcoin futures on the largest options exchange in the US, Chicago Board Options Exchange (Cboe), are in fact predicting further drops in the price.

Source: http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures

Currently, these Bitcoin futures are in “backwardation”. According to Investopedia:

“Backwardation relates to the price of a futures contract and the contract's time to expire. As the contract approaches expiration, the futures contract trades at a higher price compared to when the contract was further away from expiration. This is because the spot price is above the futures price, and the contract and spot price must eventually converge, so the future's price rises toward the spot price.”

This in a way shows a lack of investors’ confidence in Bitcoin’s price in future. However, it is not likely to affect the prices as this is not the first time that Bitcoin has been in this position. “The bitcoin futures curve teetered between being effectively flat and in a backwardation state for most of Q1,” stated a trading report by Element group that further showed that there is no connection.

Moreover, the volume of these futures are low. The December report of CryptoCompare shared that Bitcoin futures are actually decreasing in volume,

“XBTUSD futures of CME and CBOE decreased 45.5% and 48.0% respectively since November. Regulated exchanges (CME and CBOE) represented only 2.88% of the total crypto futures market in December.”

These Bitcoin futures are also not physically delivered that could be the reason why the volume is so low. However, We might see the things changing when Bakkt by Nasdaq's parent come into the market with its physically delivered Bitcoin futures. Things will definitely get an interesting turn then.


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