Bitcoin rebounds after US regulator gives green light to futures contracts

The price of bitcoin started to rebound after the US regulator gave the green light for three American exchanges to offer futures trading in the cryptocurrency.

The US Commodity Futures Trading Commission (CFTC) announced on Friday that the Chicago Mercantile Exchange (CME), as well as the CBOE Futures Exchange (CFE) and Cantor Exchange had “self-certified” new contracts for bitcoin products.

The CME said it is now planning to launch trading of bitcoin futures contracts on Monday December 18.

The news sent the price of bitcoin back over $11,000 (£8,160), according to prices on cryptocurrency exchange CEX, with advocates suggesting that the introduction of options such as futures on major exchanges will help legitimise bitcoin’s use and lower volatility levels.

It marked a recovery for the cryptocurrency, which pushed past the $10,000 and then $11,000 mark earlier this week before suffering a 20% drop.

CFTC chairman Christopher Giancarlo said bitcoin was a commodity “unlike any the commission has dealt with in the past” and as a result it had “extensive discussions” with the exchanges regarding the proposed contracts in recent weeks.

It assured that the CME, CFE and Cantor had all agreed to “significant enhancements” that will help “protect customers” and “maintain orderly markets”.

But he also stressed that investors should be aware of the “potentially high level of volatility and risk” involved in bitcoin trades.

“Market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority.

“There are concerns about the price volatility and trading practices of participants in these markets.”

Major players in financial services have hit out at the cryptocurrency in recent months, with JP Morgan boss Jamie Dimon calling bitcoin “a fraud”, adding that he would fire employees found to be trading the digital currency for being “stupid”.

Meanwhile, both South Korea and China recently banned the use of initial coin offerings (ICOs), a digital fundraising tool which sees investors exchange cryptocurrency for “tokens” representing a holding or voucher for a firm.

Commenting on the CFTC announcement, Fiona Cincotta, a senior market analyst at City Index, said: “News that CME, the world’s biggest exchange, will start to offer bitcoin future contracts has served to increase the legitimacy of this virtual currency, whilst also opening the doors to mainstream investors.

“Unsurprisingly, the value of bitcoin has charged higher again today, soaring 7.5%.

“With price movements of this size, the bitcoin is the perfect antidote to the historically low volatility of today’s traditional markets.”