The Chicago Board Options Exchange (CBOE) is withdrawing Bitcoin futures that many experts believed to be ideal for Bitcoin adoption. However, this does not necessarily mean that Bitcoin adoption or price would be adversely affected. In fact, BTC Token is poised to be more bullish according to a CNBC Fast Money Panel and some Crypto community members.
The CBOE is the largest and most prominent options exchange in the US that provides market options for 2,200 organizations.
Understanding Futures And Options
It is important to note that Cash-based future settlements are applied in specific types of options and futures contracts. Upon the expiry of the contract, the seller of the option delivers the associated cash as per the initial agreement and not the specific asset like Bitcoin.
Futures and options hedge investors from bearish trends in Crypto markets or stock markets and this guarantees positive ROI or even hedge losses. They tend to go against market forces.
CBOE Was The First Exchange To Introduce Bitcoin Futures
CBOE was the pioneering exchange to have offer Bitcoin futures in December 2017. This came following the stellar performance of BTC in the then roller-coaster Cryptocurrency market. The aim was to encourage institutional investors to invest in the largest Cryptocurrency by giving them a secure, professional and trusted channel.
BTC Bearish Cycle Is The Factor Behind The Decision
However, CBOE is pulling the plug on its Bitcoin futures contract with effect from June 2019. The reason for the action is that Bitcoin has shed off 78% of its price in the period between the signing of the CBOE’s futures contracts to date.
On the other hand, CBOE has been losing the Bitcoin futures business to its fierce rival CME that has also been offering cash backed Bitcoin futures. CME has been registering greater market volumes since inception and the product has since broken even. Therefore, it is no longer viable for CBOE to continue offering the service.
CNBC Panel Believes That Bitcoin Futures Are Also Losing Popularity
BTC recently broke out of the $4,000 level of resistance and the price has been establishing itself above that level in the past few days. This is giving some Crypto analysts a basis to suggest that Bitcoin has already hit its bottom.
CNBC’s Fast Money Panel are also speculating that demand from retail investors and shorts are losing momentum and exhausted, hence, CBOE cash backed futures are no longer feasible.
Further, the emergence of BTC custody solutions is growing and there is no need for investors to trade futures contracts.
This Is Good News For Bitcoin
Bitcoin cash backed futures allow speculative investors to bet against BTC prices according to tech analyst Gene Munster. This material negative impact has played a role in the plummeting of BTC price that has occurred for much of the period since the establishment of Bitcoin futures by CBOE and CME.
In comparison, Bakkt upcoming futures are not cash-based and this allows sellers to settle contracts in derivatives that are correlated with the real BTC prices.
The Cryptocurrency community is welcoming the abandonment of the CBOE Bitcoin futures as some members have been blaming BTC futures for price manipulation.