Is bitcoin growing up? Regulated futures boom as investors seek a safer ride

Tokens of the virtual currency Bitcoin are seen placed on a monitor that displays binary digits in this illustration picture.

Dado Ruvic/Reuters

When bitcoin was born it was a symbol of counterculture, a rebel currency with near-anonymity and a lack of regulation. A decade later, there are growing signs it’s entering the establishment its creators sought to subvert.

As the cryptocurrency has surged in value bigger investors, from trading firms to hedge funds, have increasingly turned to exchanges regulated in traditional financial centres. They are buying bitcoin futures to gain exposure to the asset while avoiding the hacks and heists that plague the industry.

The crypto market, associated by many with the dark web, money laundering and the Wild West, is beginning to be discussed by financiers in the same breath as derivatives, hedging instruments and compliance.

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Investors ploughed record levels of money into bitcoin futures at regulated exchanges in the United States and Britain last month, hungry for a piece of the action but seeking the kind of protection that will satisfy their compliance officers.

Between March and May, bitcoin more than doubled in price, an ascent peppered by double-digit price swings reminiscent of its 2017 bubble, which was driven by smaller retail investors.

During that period, Chicago-based CME Group Inc’s average daily volumes of futures contracts climbed over seven-fold to a record $508 million in May. The number of open interest contracts – those that haven’t been settled – also hit a record.

CME said bitcoin’s price gains, and the subsequent increase in volatility, attracted new investors seeking to hedge risk.

Crypto Facilities, a London-registered platform bought this year for over $100 million by major U.S. cryptocurrency exchange Kraken, said bitcoin futures daily trading volumes jumped over three-fold from March to a record $84 million in May.

In a sign of the…

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