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CME Group, one of the largest exchange groups in the world, announced last week it will roll out a bitcoin futures contract in the fourth quarter. This will unlock some of the value currently being built on cryptocurrencies and blockchain technology — new products and services — that are currently only accessible to a relatively small number of the early enthusiasts and those helping build the technology.
This will fuel the cryptocurrency’s price rise, as crypto traders and dealers can hedge their positions based on the future market. For example Bitcoin miners will benefit from futures contracts as they can use them to hedge against their mining cost, getting money in advance from speculators hoping to make a future profit.
GBTCs have a higher premium over the bitcoins. However, they are a much better investment as they offer greater benefits compared to buying bitcoins directly. With GBTC, investors have a titled and audible ownership. Shares are eligible to be held in tax-advantaged accounts such as IRA and are publicly quoted. Also, investors enjoy a network of trusted service providers.
The international interest is not surprising considering we have only recently seen the U.S. IRS , South Korea’s National Tax Service and the Income Tax Department of India involve themselves with bitcoin. It is not clear what each regulator can do to track trading involving at least one party from their country, other than force local exchanges to report all transactions and compel citizens to reveal all their trades.
So, although Bitcoin has the added legitimacy of being traded on futures exchanges, the relatively low levels of interest from big institutional investors is indicative. If history is anything to go by, the tulip bubble burst in February 1637 – not long after the Dutch created a futures market for buying bulbs in 1636 at the peak of tulip mania. The advent of futures trading may well further inflate the Bitcoin bubble” and push it to its bursting point.