After the announcement by CME that they would start offering Bitcoin futures, Bitcoin price went up very fast. Many people did not understand that CMEs idea is to stop Bitcoins volatility. The fact is that CME will put price fluctuation limits. The limits aims are to protect investors from notorious price changes. The limits will also help the currency stabilize and settle down.
Bitcoin Price Protection
CME intends to put in place special fluctuation limits at 7% and 13% over or under the previous settlement price. The limit will prevent trading over 20%range according to the details released earlier by CME. The limits are familiar to some people as they have been used before in US stock Index futures. CMC believe that if the setting of this limitation has helped the stock exchange, it will be of more importance to the highly changing Bitcoin price.
Some investors feel that Bitcoin investment is good but risky because of the unpredictable price changes. The fluctuation can be either a rise or a drop.
Stabilization of the Volatility
The introduction of Bitcoin was violent since it was a new concept with a new asset class. The prices changes in the first days after the launch changes at high rates. The prices are however starting to settle down.
Many people believe that the violent changes in price have been stopping people from investing in this currency. With the stabilization of Bitcoin prices then more people would invest in the currency. This would enable Bitcoin stretch more and become more famous.
As per Bitcoin ecosystem it most times needs one to take the first plunge. With CME announcement they opened doors for futures, and this could also open the doors for ETFs too. In fact, according to Chicago Board Options Exchange (Cboe), they will start trading Bitcoin futures early 2018. According to the Chicago Board Options Exchange president Chris Concannon, the regulation of Bitcoin will help the case for Bitcoin ETF.
According to Concannon, “There is the possibility of ETFs coming into place after the regulation of Bitcoin futures is done and futures markets built.” It will be of great interest to see how the futures markets will affect Bitcoin trading. However, the regulation seems to be a good idea. With the interest of all investors taken into place, the regulation will be a positive impact. This will help reduce the bad instances of the 40% drop witnessed in September.